The research group (L to R) Dr Huong Dang, Professor Jedrzej Bialkowski and Dr Xiapeng Wei.
The new research, co-authored by UC鈥檚 Head of Department of Economics and Finance,听Professor Jedrzej Bialkowski,听Dr Huong Dang听and听Dr Xiaopeng Wei, has been accepted for publication in the prestigious听听and explores how the strength of political signals impact the relationship between market volatility and economic policy uncertainty.
鈥淲e observed a puling phenomenon following the election of Donald J. Trump in the United States and the Brexit referendum in the United Kingdom. Certain well-established financial relationships did not hold anymore. Traditionally economic policy uncertainty and a benchmark of fear of the market, known as the Volatility Index (VIX) have a very strong positive relationship, but we saw these move apart,鈥 Professor Bialkowski says.
鈥淲e find evidence for existing theory that claims that the relationship might be affected by the quality of political signals. Political signals show strength in the information of what politicians say and in their actions. So certainty around: if they say A at the start of the week, they won鈥檛 say B at the end of the week.鈥
The research has resulted in developing a measure -听蚕颈苍诲别虫听- for the quality of political signals.
鈥淚n our paper we show if the quality of political signal is low it breaks some of the well-established relationships in a financial market. In order to achieve it, we have come up with a benchmark for the UK and US which tells us what the quality of the political signal is at a given moment.鈥
The research team has developed indices for the United States and United Kingdom, with future indices being developed for Canada, Australia and New Zealand. The benchmarks could be compared to a measure that journalists came up with 鈥撎. 鈥淥ur measurement is more scientific and can provide further insight into the uncertainty of financial markets at any given moment.鈥
The research team are publishing听Qindices听on a monthly basis and those can be found on听.
The paper,听,听will be published in the听Journal of Financial Economics
For more information or interviews contact:
Professor Jedrzej Bialkowski, 麻豆传媒团队 Business School, Head of Department of Economic and Finance,听Jedrzej.bialkowski@canterbury.ac.nz听Phone: 03 369 4060
