ENERGY-RELATED UNCERTAINTY AND STOCK MARKET VOLATILITY: EVIDENCE FROM THE WEALTHIEST ECONOMIES IN THE WORLD THROUGH THE GARCH-MIDAS APPROACH

Selim Gungor¹ and Muge Saglam Bezgin²

¹ Tokat Gaziosmanpasa University, Tokat, Turkey
² Karamanoglu Mehmetbey University, Karaman, Turkey

This study aims to analyze the effect energy-related uncertainty has on the volatility of the stock markets of 18 developed and developing countries ranking among the wealthiest according to their GDP. The study focuses on understanding how EUI influences market dynamics and volatility patterns across different economies. Using the GARCH-MIDAS approach, this research examines stock market indices from January 2003 to October 2022. The analysis reveals that all stock market indices are influenced by EUI. Notably, the S&P-TSX index exhibits the lowest MIDAS weight, indicating that Canada’s market volatility is the least affected by EUI. Conversely, the highest MIDAS component weights are observed in the markets of China and the United Kingdom. The EUI shows the greatest influence on the volatility of the Indian and Chinese markets, whereas its influence is minimal on the Brazilian and Canadian markets.

Keywords: energy uncertainty, realized volatility, risk management, GARCH-MIDAS

JEL Classification: C58, G32, K32, Q43

Economic Horizons, 2025, 27(1), 127-140. Published online April 8^th 2025

doi:10.5937/ekonhor2502135G

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