Can VPIN forecast geopolitical events? Evidence from the 2014 Crimean Crisis
| Autor: | Felipe Bastos G. Silva, Ekaterina Volkova |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
040101 forestry
Actuarial science 050208 finance Index (economics) Mathematical finance 05 social sciences Equity (finance) 04 agricultural and veterinary sciences Monetary economics Market microstructure Geopolitics 0502 economics and business Market price Economics Predictive power 0401 agriculture forestry and fisheries Business General Economics Econometrics and Finance Finance Stock (geology) |
| Zdroj: | Annals of Finance. 14:125-141 |
| ISSN: | 1614-2454 1614-2446 |
| DOI: | 10.1007/s10436-017-0314-z |
| Popis: | We take the recent Crimean Crisis and the sequence of outcomes that led to the intervention by the Russian Army which directly affected equity prices in Russia, investigating how informed traders may have used their advantage to trade prior to the moment markets fell. We compute the Volume-synchronized Probability of Informed Trading (VPIN) for the Russian RTS equity index and for individual stocks, documenting that both in the index level and for most individual equities VPIN levels soared considerably between one and three trading days before market prices reflect the invasion. We also investigate the predictive power of the cumulative distribution of VPIN on future stock prices, showing a statistically significant (negative) relation during the period tensions between Russia and Ukraine were elevated. Last, we investigate the behavior patterns of VPIN to global depository receipts (GDRs) of Russian firms, documenting a similar increasing pattern prior to the invasion date but subsequent to the spikes obtained from the corresponding securities locally traded in Russia. Overall, our results provide additional support for the use of VPIN as a measure of monitoring the likelihood of undesirable geopolitical events. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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