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Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war

Jonathan A. Batten Orcid Logo, Sabri Boubaker Orcid Logo, Harald Kinateder Orcid Logo, Tonmoy Choudhury Orcid Logo, Niklas F. Wagner

Journal of Economic Behavior & Organization, Volume: 215, Pages: 325 - 350

Swansea University Author: Sabri Boubaker Orcid Logo

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DOI (Published version): 10.1016/j.jebo.2023.09.016

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 Autoregr...

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Published in: Journal of Economic Behavior & Organization
ISSN: 0167-2681
Published: Elsevier BV 2023
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URI: https://cronfa.swan.ac.uk/Record/cronfa64816
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first_indexed 2023-11-23T17:03:46Z
last_indexed 2023-11-23T17:03:46Z
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spelling v2 64816 2023-10-24 Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war 43999fff86cd8a29f4815fb4dfa47729 0000-0002-6416-2952 Sabri Boubaker Sabri Boubaker true false 2023-10-24 BAF 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. Journal Article Journal of Economic Behavior & Organization 215 325 350 Elsevier BV 0167-2681 Banks, Financial institutions, GSIB, Implied volatility, Pandemics, Value-at-risk, War 1 11 2023 2023-11-01 10.1016/j.jebo.2023.09.016 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University Tonmoy Choudhury would like to acknowledge the support of King Fahd University of Petroleum and Minerals for financial assistance under grant numbers INFE2207 and EC213001. 2024-04-15T21:46:33.5949102 2023-10-24T16:19:07.8887898 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Jonathan A. Batten 0000-0002-3871-7360 1 Sabri Boubaker 0000-0002-6416-2952 2 Harald Kinateder 0000-0002-3176-2812 3 Tonmoy Choudhury 0000-0002-7745-0048 4 Niklas F. Wagner 5
title Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war
spellingShingle Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war
Sabri Boubaker
title_short Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war
title_full Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war
title_fullStr Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war
title_full_unstemmed Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war
title_sort Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war
author_id_str_mv 43999fff86cd8a29f4815fb4dfa47729
author_id_fullname_str_mv 43999fff86cd8a29f4815fb4dfa47729_***_Sabri Boubaker
author Sabri Boubaker
author2 Jonathan A. Batten
Sabri Boubaker
Harald Kinateder
Tonmoy Choudhury
Niklas F. Wagner
format Journal article
container_title Journal of Economic Behavior & Organization
container_volume 215
container_start_page 325
publishDate 2023
institution Swansea University
issn 0167-2681
doi_str_mv 10.1016/j.jebo.2023.09.016
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 0
active_str 0
description 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.
published_date 2023-11-01T21:46:34Z
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score 11.017797

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