Study On The Dynamic Relationship Between Economic Factors And Stock Market Risk Based On Varying Coefficient Quantile Regression Model

The analysis of the dependence structure between the stock markets of the major country of the world and influential global factors has always been a hot topic in inter-national finance area. The literatures before focused on the impact of economic factors on the mean of stock returns by using the linear regression model. This paper examines the dependence structure between the stock markets of the major country of the world and influential global factors by using the quantile regression with varying coefficients approach. Our study base on the stock returns of Britain, France, Germany, Canada, Brazil, Japan and China for the period from October 1997 to December 2014. The results show that the stock markets risk (lower quantile) exhibit dependence with the global stock (S&P500 index) as well as the commodity markets (oil, gold). This depen-dence structure is affected by the onset of the recent global financial crisis. By contrast, the impact of the changes in the U.S. stock market uncertainty (CBOE Volatility Index) and the U.S. economic policy uncertainty is almost not significant.