Financial Quantitative Techniques Assignment Sample

Market Integration, Co-movement, Risks, and Spillover Effects: An Analysis

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Introduction - Analyzing Cross-Market Co-movement and Spillovers

A) Market Integration and Co-movement:

Critically analysis the market integration and co-movement for three period

1) Analyzing the co movement between three sectors of the UK and US market

The research helps to understand that the UK and the US market are dealing with different stock price of the different market. At the same time, after conducting the calculator it can be understand the co movement is nothing it is the correlation that is conducted between “UKX and standard deviation of Industrials sector”. At the same time, the research also deals with the “Correlation between UKX and average returns of Technology sector” and “Correlation between UKX and standard deviation of Industrials sector” respectively.

UK market

As per the opinion of Klein et al. (2018), states that for conducting comparison it is necessary to conduct various statistical analysis that are volatility, correlation, and portfolio performance of the particular stock index. At the same time, after calculating the UKX correlation with Technological sector it is found that the correlation is going upwards in the financial year 2021 that is up to 1.0000 values. As per the calculation it can also be found that in the financial year 2020 the value of correlation was at a same stage that was among 0.60000 respectively [refer to appendix 1].

In the same way, after conducting the calculation of co movement that is correlation between UKX and average returns of industrial sectors it can be found that the value of correlation is stable between 0.80000 to 0.60000 in the financial year 2018, 2019 and in 2020. On the other hand, in the financial year 2021 the correlation of the average return of industrial sector came down however, it was not down than the value of 0.60000 respectively. After that the back us up has conducted which has helped them to raise the value of correlation more than 0.80000 which has extended till 1.0000 on 07th December 2021 respectively [refer to appendix 2].

At the same time, the correlation value is also collected that has provided help in understanding about the daily rate of exchange of the UKX index price. As per the opinion of Peters and Noble, (2020), evaluate that sensitivity and the correlation analysis helps to understand deep about the systematic connection is showing between the conducted terms. However, the Utility sectors are dealing with the low price index at the financial year 2018 until the middle of 2020 was ranging between 0.40000 - 0.30000 respectively. On the other hand, the value of correlation has been upgraded from the March 2020, which has shown the value of 0.50013 respectively. However, while conducting the interpretation of main findings it has been seen that in the financial year 2021 is 1.0000 respectively [refer to appendix 3]. 

US market

After conducting the research on UK stock the correlation valuation is also calculated on US stock that for the financial year 2018 to 2021 on three different sectors Technological, Industrial and Utility Sectors. The correlation or the co movement value between SPX and “average returns of Technology sector” is dealing with correlation value between 0.36336 - 0.27518 till the financial year 2018 to middle of 2020. However, the value has been increased between the middle of 2020 to 2021 that is 0.42627 to 1.0000 respectively.

The correlation between SPX and average returns of Industrial sector in financial year 2018 to 2020 is stable and more than any other sector, that is from 0.50186 to 0.59021 respectively. However, which has been increased until 1.0000 in the financial year 2021 December.

At the same time, the conducting correlation among the “SPX and average returns of Utilities sectors” helps to understand that the value of the correlation is very low that is under 0.30000. However, the correlation value in the financial year 2018 and 2020 is 0.22832 to 0.16268 respectively. Therefore, the value of correction of SPX index has been increased after 16th July, 2020 which was 0.25961 till December 2021 it was up to 1.0000 respectively.

2) Analysing the degree of integration between UK & US and UK & Y.C

The degree of integration helps to understand that arrangement of the barriers and the economical sectors between the countries. At the same time, while conducting the study on this paper it can be understood that the stock rate of the UK and US is in good position, which is more than 1.00000 respectively. On the other hand, in some sector the integration valuation of standard deviation is 0.000114715269854472 of the UK. The research helps to understand the standard deviation of US is 0.0000945497746412998. On the other hand, the standard deviation of the Y.C is 0.000153995040482915 comparatively less than U.K and U.S respectively. Therefore, the calculator between the integration has helped for conducting the research and analysing the function of stock between U.K, U.S and Y.C respectively [refer to appendix 4].

Therefore, after conducting the research it can be understands that the valuation of the organisation that is regarded based on its valuation of the covariance and the valuation that is regarded based on its spill-over valuation of the UK is totally dependent on degree of integration respectively.

(B) Risks and spillover effect

(1) Investigate the impact of US return and Y.C market return and UK market return on returns of selected three sectors of the UK market

The impact of US market return on US return, UK market return, and Y.C market return on the basis of three sectors of the UK market have been calculated on the basis of regression analysis. The regression analysis has been calculated for three years according to regression statistics. The standard deviation for three years is 0.006164664, 0.005620814, and 0.006280546 respectively. According to Zhu et al. (2020), states that this return on the standard error makes the regression, and their statistical values and the values observed in the regression statistics. The observation for the three periods of the industry has been evaluated and this shows their observation at a range of 111, 105, and 95. This valuation shows the observation of three periods. The R. square that has been also evaluated for the valuation of three consecutive periods is 0.197209525, 0.507524056, and 0.50991037 respectively. This shows the amount of regression analysis that is conducted and evaluated their statistical regression analysis. There is the total valuation of regression that has been evaluated for the three periods. The total regression valuation for the three years is 110, 104, and 94 respectively.

(Refer to appendix 4)

(2) Calculation of risk volatility for the three countries

Investigate co-movement of risks between market indices and three sectors.

The movements that indicate the risk of the three sectors of the UK have been considered as the covariance of the organization. The covariance for the three sectors of the country that will be regarded on the basis of 09/01/2018 up to 07/12/2021 was 0.00002901171 and 0.00007868328. This shows the nature of the co-movement of variance that is related to the variables and is regarded and continued up to 2021. As per the opinion of Bai, and Lam (2021), state that this also shows the valuation of the organization that is regarded on the basis of its valuation of the covariance and the valuation that is regarded on the basis of its spill-over valuation of the UK. This is the valuation that is regarded on the basis of spill-over valuation and the observation that is regarded on the basis of its adjusted squares. This is the variance that is regarded and concluded on the basis of the three years spill overvaluation and its regression analysis for the three years of the industries of the UK.

Impact of market risks on the risk level of three sectors

The market risk that is involved on the basis of the three sectors of the organization is regarded as the valuation and their regression that are involved on the basis of the valuation of its regression and the market risks that are directly involved in the organization. The risks that are involved on the basis of the level of risk of the organization involved on the basis of its valuation that is regarded and evaluated for the three organizational sectors of the company. This makes the analysis on the basis of its valuation that is involved on the basis of the sectors of the organization. As per the viewpoint of Riepina et al (2020), state that the risk can make an impact on the organization as they make the valuation that is regarded and evaluated on the concept of the organization. The risk can also make an impact on the market of the organizational sector. This makes the evaluation of the market on the basis of the risk that is involved on the basis of the organizational sectors that makes an impact on the market risk in the industry.

(3) Effects of that risk

The involvement of the risk that is affecting the risk makes the involvement that is regarded on the basis of the sector of the organization. The risk that can affect the organizational sector can also make an impact on the economic condition of the country. This makes the differentiation that is involved on the basis that is regarded for the involvement of the organization and also makes the effect on the economic condition of the organization. This also makes the involvement of the risk that it affects the organization of the country. As per the viewpoint of Sathishkumar et al. (2020), states that the valuation is regarded on the basis of the organization's needs and according to their valuation the variables that are regarded and calculated on the basis of their needs and need to require the valuation of the market and their risks that can make an impact on the basis of the organizational sectors. This can also make an impact that can make the valuation and the organizational sector that are also regarded as their risk to the organization.

© Conclusions and Suggestions for the Investors

The report has been prepared on the basis of the organization that can make an impact on the company of the UK. This has been made the valuation and is regarded on the basis of its valuation that is regarded as the impact of the organization on the basis of its valuation. This has also created an impact on the basis of the organization that is regarded for a better impact within the industries of the country. This can make an impact on the basis of the requirements that can make the cash in the organization. The main basis of the organization that is required to make the impact and they are considered for the organization that is considered for the organization and for their main benefits of the organization. The organization needs to consider the valuation and the benefits of the organization. This requires the valuation of the organization that needs to be considered for the organization of the country and is regarded for the valuation of the organization. This can also include the organizational sector at the place where they can be able to evaluate the future circumstances that are required of them. Overall analysis indicated that investor can earn positive return from the investment in US and UK industries and companies. Analysis indicated that that market is volatile and risky for investor for this reason investor should be cautious.

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