NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Macroeconomic Volatility and Stock Market Volatility, Worldwide

Francis X. Diebold, Kamil Yilmaz

NBER Working Paper No. 14269
Issued in August 2008
NBER Program(s):Asset Pricing, Economic Fluctuations and Growth, International Finance and Macroeconomics

Notwithstanding its impressive contributions to empirical financial economics, there remains a significant gap in the volatility literature, namely its relative neglect of the connection between macroeconomic fundamentals and asset return volatility. We progress by analyzing a broad international cross section of stock markets covering approximately forty countries. We find a clear link between macroeconomic fundamentals and stock market volatilities, with volatile fundamentals translating into volatile stock markets.

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Document Object Identifier (DOI): 10.3386/w14269

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