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The empirical analysis of dynamic relationship between financial intermediary connections and market return volatility

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  • Renata Karkowska

    (University of Warsaw, Faculty of Management)

Abstract

Article aims to demonstrate the significant impact of dynamics of the relationship between financial intermediaries on the level of market volatility. Particularly important are the growing share of the links between hedge funds and other financial institutions. In order to demonstrate the dynamic test was presented Granger causality, which allows the statistical analysis of cause and effect relationships in the risk spread in the financial system. Using multiple regression analysis study was calculated the impact of the hedge fund market development (measured in assets, leverage, the price volatility in various financial markets). Due to data availability study has been limited to 10-year period of analysis (2001-2011). The results show a significant correlation between the volatility in the stock market, bonds and CDS, and the activities of hedge funds on financial markets.

Suggested Citation

  • Renata Karkowska, 2013. "The empirical analysis of dynamic relationship between financial intermediary connections and market return volatility," Faculty of Management Working Paper Series 32013, University of Warsaw, Faculty of Management.
    • Handle: RePEc:sgm:fmuwwp:32013
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    File URL: http://www.wz.uw.edu.pl/portaleFiles/5630-Faculty%20of%20M/WP/FMWorkingPKarkowska1.pdf
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    References listed on IDEAS

    as
    1. Billio, Monica & Getmansky, Mila & Lo, Andrew W. & Pelizzon, Loriana, 2012. "Econometric measures of connectedness and systemic risk in the finance and insurance sectors," Journal of Financial Economics, Elsevier, vol. 104(3), pages 535-559.
    2. Fung, William & Hsieh, David A., 2000. "Measuring the market impact of hedge funds," Journal of Empirical Finance, Elsevier, vol. 7(1), pages 1-36, May.
    3. Monica Billio & Mila Getmansky & Andrew W. Lo & Loriana Pelizzon, 2010. "Econometric Measures of Systemic Risk in the Finance and Insurance Sectors," NBER Working Papers 16223, National Bureau of Economic Research, Inc.
    4. Cao, Charles & Chang, Eric C. & Wang, Ying, 2008. "An empirical analysis of the dynamic relationship between mutual fund flow and market return volatility," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2111-2123, October.
    5. Mr. Manmohan Singh, 2012. "The (Other) Deleveraging," IMF Working Papers 2012/179, International Monetary Fund.
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    Cited by:

    1. Yusuf Aina SOYEBO & Russell Olukayode C. SOMOYE, 2019. "Financial Intermediation and Stock Prices of Deposit Money Banks (DMBS) in Nigeria: a Panel Cointegration Approach," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 1, pages 20-27.

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    More about this item

    Keywords

    financial market; hedge fund; market instability; volatility;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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