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“The Influence of External Economic Events on the Volatility of Shares of the Largest Companies”

ФИО студента: Karpova Elizaveta

Руководитель: Oleg O. Zamkov

Кампус/факультет: International College of Economics and Finance

Программа: Double Degree Programme in Economics of the NRU HSE and the University of London (Bachelor)

Год защиты: 2021

Volatility has always been considered one of the most important indicators for investors. Many of economists and scientists have been studying it. However, what factors can lead to its jumps and changes is still a subject to many discussions. In this paper, we will focus on external macroeconomic events (including military conflicts in the domestic country of the companies taken in this paper). It was an interesting point to make a model for the volatility of the largest companies chosen by their capitalization, since these are the companies that are mostly widespread among the majority of players in the stock market. In this diploma the main independent variables were the exchange rates of the five largest trading partner countries of the United States (the headquarters of all companies in the sample are located in this country), inflation rate expressed as CPI, market volatility and market risk premium calculated on the basis of S&P 500 data, gold prices, a dummy variable related to the beginning of military activity for a specific period (month, year), and a lagged volatility variable. Four models were provided for analysis and study, the most effective of which was the one that was the fixed effects model with annual data. For this model, only three explanatory variables were found to be significant. Therefore, it can be supposed that long-term volatility is influenced by its lag variable, market volatility and the exchange rate of one or several of the largest partner countries. The second most efficient model leads to some slightly different results: volatility according to the random effects model based on monthly results can be explained by the exchange rates of the partner countries, volatility of S&P 500 (as in the previous case), and the inflation rate.

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