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Volatility impacts on global banks : Insights from the GFC, COVID-19, and the Russia-Ukraine war
Batten, Jonathan A. Boubaker, Sabri Kinateder, Harald Choudhury, T. Wagner, Niklas F.
Batten, Jonathan A.
Boubaker, Sabri
Kinateder, Harald
Choudhury, T.
Wagner, Niklas F.
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
Date
2023
Type
Journal article
Journal
Book
Volume
215
Issue
Page Range
325-350
Article Number
ACU Department
Peter Faber Business School
Faculty of Law and Business
Faculty of Law and Business
Collections
Relation URI
Event URL
Open Access Status
License
All rights reserved
File Access
Controlled
Notes
© 2023 Elsevier B.V. All rights reserved.