Do different stock indices volatility respond differently to Central bank digital currency signals?

Wenjie Li; Zimei Huang; Wenjie Li; Zimei Huang

doi:10.3934/era.2023283

Electronic Research Archive

2023, Volume 31, Issue 9: 5573-5588. doi: 10.3934/era.2023283

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Do different stock indices volatility respond differently to Central bank digital currency signals?

Wenjie Li ¹,
Zimei Huang ^{2
,
,}

1.
School of Statistics and Mathematics, Guangdong University of Finance and Economics, Guangzhou 510320, China
2.
School of Economics and Statistics, Guangzhou University, Guangzhou 510006, China

Academic Editor: Zisheng Ouyang

Received: 09 May 2023 Revised: 12 July 2023 Accepted: 02 August 2023 Published: 14 August 2023

Central bank digital currency (CBDC) signals affect the volatility of stock indices in different sectors differently. This paper aims to examine whether the CBDC signal plays a role on the volatility of different stock indices. First, we employ a text analysis to compile the CBDC signal index, which spans from January 4, 2013 to March 16, 2023. Then, based on the mixing frequency data, we construct generalized autoregressive conditional heteroskedasticity mixed data sampling (GARCH-MIDAS) models to explore the various impacts of CBDC signal on the volatility of stock indices in different sectors. The findings show the heterogeneous effect of CBDC signals on the volatility of stock indices across different sectors. Furthermore, CBDC signals have a heterogeneous effect on the volatility of stock indices in different sectors for different lag periods.
- central bank digital currency signals,
- stock indices,
- GARCH-MIDAS model,
- heterogeneous effect
Citation: Wenjie Li, Zimei Huang. Do different stock indices volatility respond differently to Central bank digital currency signals?[J]. Electronic Research Archive, 2023, 31(9): 5573-5588. doi: 10.3934/era.2023283

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Abstract

Central bank digital currency (CBDC) signals affect the volatility of stock indices in different sectors differently. This paper aims to examine whether the CBDC signal plays a role on the volatility of different stock indices. First, we employ a text analysis to compile the CBDC signal index, which spans from January 4, 2013 to March 16, 2023. Then, based on the mixing frequency data, we construct generalized autoregressive conditional heteroskedasticity mixed data sampling (GARCH-MIDAS) models to explore the various impacts of CBDC signal on the volatility of stock indices in different sectors. The findings show the heterogeneous effect of CBDC signals on the volatility of stock indices across different sectors. Furthermore, CBDC signals have a heterogeneous effect on the volatility of stock indices in different sectors for different lag periods.

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