Volatility impacts on global banks : Insights from the GFC, COVID-19, and the Russia-Ukraine war
Journal article
Batten, Jonathan A., Boubaker, Sabri, Kinateder, Harald, Choudhury, T. and Wagner, Niklas F.. (2023). Volatility impacts on global banks : Insights from the GFC, COVID-19, and the Russia-Ukraine war. Journal of Economic Behavior and Organization. 215, pp. 325-350. https://doi.org/10.1016/j.jebo.2023.09.016
Authors | Batten, Jonathan A., Boubaker, Sabri, Kinateder, Harald, Choudhury, T. and Wagner, Niklas F. |
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Abstract | This study analyzes the volatility impact of the Chicago Board Options Exchange Volatility Index (VIX) on the global banking sector during the Global Financial Crisis (GFC), COVID-19, and the Russia-Ukraine War. Using a Dynamic Conditional Correlation (DCC) model with asymmetric Generalized Autoregressive Conditional Heteroskedasticity (GARCH) volatility, we examine three geographical regions, focusing on large banks. The key findings include significant symmetric Granger causality between volatility changes and negative bank returns during the GFC, asymmetric impacts of volatility increases and decreases in the lower quartile of bank returns, with COVID-19 exhibiting the strongest asymmetry, and volatility shocks affecting the downside risk of the banking sector, where the highest value-at-risk (VaR) levels occur in the GFC and the lowest during the war period. Finally, Asian banks demonstrated greater resilience to volatility impacts than European banks, which were the most affected by COVID-19 and the war. Overall, we find that volatility has less impact on the global banking sector in the war sample than in other crises. Our findings provide valuable insights for policymakers, investors, and regulators to help effectively manage future crises and ensure the stability of the global banking sector. |
Keywords | Banks; Financial institutions; GSIB; Implied volatility; Pandemics; Value-at-risk; War |
Year | 01 Jan 2023 |
Journal | Journal of Economic Behavior and Organization |
Journal citation | 215, pp. 325-350 |
Publisher | Elsevier Science BV |
ISSN | 0167-2681 |
Digital Object Identifier (DOI) | https://doi.org/10.1016/j.jebo.2023.09.016 |
Web address (URL) | https://www.sciencedirect.com/science/article/pii/S0167268123003323 |
Open access | Published as non-open access |
Research or scholarly | Research |
Page range | 325-350 |
Publisher's version | License All rights reserved File Access Level Controlled |
Output status | Published |
Publication dates | |
Online | 28 Sep 2023 |
Publication process dates | |
Accepted | 10 Sep 2023 |
Deposited | 25 Jun 2024 |
Additional information | © 2023 Elsevier B.V. All rights reserved. |
Place of publication | Netherlands |
https://acuresearchbank.acu.edu.au/item/90q73/volatility-impacts-on-global-banks-insights-from-the-gfc-covid-19-and-the-russia-ukraine-war
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