Volatility Impacts on the European Banking Sector: GFC and COVID-19

Volatility Impacts on the European Banking Sector: GFC and COVID-19
IMG - Volatility Impacts on the European Banking Sector: GFC and COVID-19

This paper analyses the volatility transmission between European Globally Systematically Important Banks (GSIBs) and implied stock market volatility. A Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity model is applied to determine the dynamic correlation between returns of Europe’s GSIBs and the world’s most prominent measure of market “fear”, the CBOE Volatility Index (VIX). The results identify a higher negative co-relationship between the VIX and GSIB bank returns during the COVID-19 period compared with the Global Financial Crisis (GFC), with one-day lagged changes in the VIX negatively Granger-causing bank returns. The asymmetric impact of changes in implied volatility is examined by quantile regressions, with the findings showing that in the lower quartile - where extreme negative bank returns are present - jumps in the VIX are highly significant. This effect is more pronounced during COVID-19 than during the GFC. Additional robustness analysis show that these findings are consistent during the periods of the Swine Flu and Zika virus epidemics.

Mohammed Alhaji Mohammed

Dr. Tonmoy Choudhury

Assistant Professor

King Fahd University of Petroleum and Minerals (KFUPM)

Dr. Tonmoy Choudhury has joined the King Fahd University of Petroleum and Minerals from Edith Cowan University, Australia where he was coordinating and lecturing Risk management in Financial Market and Institutions. In 2021, he has won the prestigious Emerald Literary Award for his works on risk spillover of U.S. states. His research focuses on the multidisciplinary implication of financial management with a strong focus on risk spillover. He has finished his Ph.D. in Banking from Western Sydney University in 2019. He also holds a bachelor’s in accounting from Macquarie University, a master’s in finance from Australian National University, and an M.Phil. in Management from the University of Wales, UK. He has published in several prestigious journals including Journal of International Financial Markets, Institutions & Money, Production Planning & Control, Finance research Letter, Pacific accounting review, Global Finance Journal, and International Journal of Agile Systems and Management. These publications have given him the acceptability of a financial market specialist around the world. Two of his publications have been accepted and communicated by World Health Organization as COVID-related research. His interview on the impact of the Coronavirus was published in the Australian national news portal “The Wire”. He has also done numerous TV segments for international broadcasters. He is currently serving as Non-executive Director at The Commercial Education Society of Australia. He has received three external research grants as chief investigator totaling over 200K. He has also received three internal grants from ECU. In 2019 he has received the commerce discipline award from the business school of Edith Cowan University. He is currently serving on several editorial boards of prominent journals where he is actively guest editing special issues on contemporary topics.

Thursday - May 26, 2022
12:00 PM (KSA Time GMT+3)
Building #24 - Room #115
Organized by
Accounting and Finance Department