Fundamental Factors Affecting the MOEX Russia Index: Retrospective Analysis

Lozinskaia, Agata and Saltykova, Anastasiia (2019): Fundamental Factors Affecting the MOEX Russia Index: Retrospective Analysis. Published in: CEUR Workshop Proceedings , Vol. 2479, (26 September 2019): pp. 32-45.

Abstract

This paper is an empirical study of the changing nature of the de-pendence of fundamental factors on thestock market index, which is the trend identified earlier in the Russian stock market. We empirically test the impact of daily values of fundamental factors on the MOEX Russia Index from 2003 to 2018. The analysis of the ARIMA-GARCH (1,1) model with a rolling window reveals that the change in the power and direction of the influence of the fun-damental factors on the Russian stock market persists. The Quandt-Andrews breakpoint test and Bai-Perron test identify the number and likely location of structural breaks. We find multiple breaks probably associated with the dra-matic falls of the stock market index. The results of the regression models over the different regimes, defined by the structural breaks, can vary markedly over time. This research is of value in macroeconomic forecasting and in the invest-ment strategy development.

• Item Type: MPRA Paper
• Language: English
• Keywords: Russian stock market; fundamental factors; structuralinstability; structural breaks; rolling regression; breakpoint tests
• Subjects: C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation

References

Anatolyev, S.: A 10-year retrospective on the determinants of Russian stock returns.Re-search in International Business and Finance 22(1), 56–67(2008).

Andreou, E., Ghysels, E.:Detecting multiple breaks in financial market volatility dynam-ics. Journal of Applied Econometrics 17(5), 579-600 (2002).

Andrews, D.: Tests for Parameter Instability and Structural Change with Unknown Change Point. Econometrica 61(4), 821–856 (1993).

Andrews, D., Ploberger, W.: Optimal Tests When a Nuisance Parameter is Present Only Under the Alternative. Econometrica 62(6), 1383–1414(1994).

Asaturov, K., Teplova, T.: Effekt peretekaniya volatil'nosti na fondovyh rynkah (chast' 2). Upravlenie finansovymi riskami (4), 254-266(2012).

Bai, J., Perron, P.: Estimating and Testing Linear Models with Multiple Structural Chang-es. Econometrica 66, 47–78(1998).

Bai, J., Perron, P.: Computation and Analysis of Multiple Structural Change Models. Jour-nal of AppliedEconometrics 6, 72–78(2003).

Berezinec,I., Bulatova, L., Il'ina, YU., Smirnov M.: Reakciya rossijskogo fondovogo ryn-ka na ob"yavleniya o vyplate dividendov: empiricheskoe issledovanie.Vestnik Sankt-Peterburgskogo universiteta. Ser. Menedzhment (1), 44-86(2015).

Borzyh, D. A., Hasykov, M. A., YAzykov, A. A.: A new method of structural breaks de-tection in GARCH-models (in Russian).http://www.vestnik.vsu.ru/pdf/econ/2017/02/2017-02-16.pdf(2017).

Bussiere, M., Fratzscher, M.: Towards a new early warning system of financial crises.Journal of International Money and Finance25(6), 953-973 (2006).

Cheremushkin, S.: Vyyavlenie puzyrej na fondovom rynke s pomoshch'yu modelej s pereklyucheniem rezhimov i kvantil'noj regressii. Finansovyj menedzhment (6), 69-96. (2011).

Cheremushkin, S.: Statisticheskij analiz zavisimosti rossijskogo fondo-vogo rynka ot mak-roekonomicheskih peremennyh.Upravlenie korporativnymi fi-nansami(4), (2014),http://sergei-cheremushkin.ru/financial_analysis/stock_market_analysis.html,last accessed2019/08/17.

De Vries, L., Gensler, S., Leeflang, P.:Popularity of brand posts on brand fan pages: An investigation of the effects of social media marketing.Journal of interactive marketing 26(2), 83-91(2012).

Fedorova, E., Pankratov, K.: Vliyanie makroekonomicheskih faktorov na fondovyj rynok Rossii. Problemy prognozirovaniya (2), (2010).

Goryaev, A., Sonin, K.: Is Political Risk Company-Specific? The Market Side of the Yu-kos Affair. CEPR Discussion Paper 5076 (2005).

Hayo, B., Kutan, A.: The impact of news, oil prices, and global market developments on Russian financial markets. Economics of Transition 13(2), 373-393 (2005).

Jalolov, M., Miyakoshi, T.: Who drives the Russian financial markets?. The Developing Economies 43(3), 374–395 (2005).

Korhonen, I., Peresetsky, A.:What influences stock market behavior in Russia and other emerging countries? Emerging Markets Finance and Trade52(5), 1210-1225(2016).

Kuan, C. H.: Modeli s markovskimi pereklyucheniyami. Quantile (11),13–39 (2013).

Li, Q., Wang, L., Qiu, F.:Detecting the Structural Breaks in GARCH Models Based on Bayesian Method: The Case of China Share Index Rate of Return. Journal of Systems Sci-ence and Information 3(4), 321-333 (2015).

Lozinskaia, A., Zhemchuzhnikov, V.: MICEX index forecasting: the predictive power of neural network modeling and support vector machine. Perm University Herald, Economy 1(12), 49–60 (2017) .

Mikosch, T., Starica, C.:Changes of structure in financial time series and the GARCH model. Revstat Statistical Journal 2(1), 41-73 (2004).

Peresetsky, A.:, What determines the behavior of the Russian stock market, MPRA paper 41508, University Library of Munich.https://mpra.ub.uni-muenchen.de/41508/1/MPRA_paper_41508.pdf(2011).

Pesaran, M., Timmermann, A.: Market timing and return prediction under model instabil-ity.Journal of Empirical Finance9(5), 495-510 (2002).

Quandt, R.: Tests of the hypothesis that a linear regression system obeys two separate re-gimes.Journal of the American statistical Association 55(290), 324-330(1960).

Rapach, D., Wohar, M.:In-sample vs. out-of-sample tests of stock return predictability in the context of data mining. Journal of Empirical Finance 13(2), 231-247(2006).

Samoylov,D.: Faktory, okazyvayushchie vliyanie na indeks RTS vo vremya finansovogo krizisa 2008–2009 gg. i do nego.Ekonomicheskij zhurnal Vysshej shkoly ekonomiki (2)244-267(2010).

Solntsev, O., Pestova, A., Mamonov, M., Magomedova Z.: Opyt razrabotki sistemy ranne-go opoveshcheniya o finansovyh krizisah i prognoz razvitiya bankovskogo sektora na 2011-2012 gg. ZHurnal Novoj ekonomicheskoj associacii 4(12), 41-76 (2011).

Smith, D.: Testing for structural breaks in GARCH models.Applied Financial Economics, 18(10), 845-862(2008).