#08-30
Macroeconomic Volatility and Stock Market Volatility, World-Wide
Francis X. Diebold and Kamil Yilmaz, August 2008
Abstract: Notwithstanding its impressive contributions to empirical financial economics, there
remains a significant gap in the volatility literature, namely its relative neglect of the connection
between macroeconomic fundamentals and asset return volatility. We progress by analyzing a
broad international cross section of stock markets covering approximately forty countries. We
find a clear link between macroeconomic fundamentals and stock market volatilities, with
volatile fundamentals translating into volatile stock markets.
Keywords: Financial market, equity market, asset return, risk, variance, asset pricing
JEL classifications: G1, E0
