Stock Market Volatility and Inequality Distributions – A Focus on Emerging Countries.

This thesis presents three independent research papers on the linkages between stock market volatility and inequality distributions, with a particular focus on emerging countries. The initial chapter of this thesis delves into the factors affecting stock market volatility and identifies the necessity of scrutinising its impacts on inequality distributions. Additionally, this chapter provides the overarching findings and contributions derived from the investigations conducted in Chapters 2,3, and 4. Specifically, the second chapter investigates the firm-specific factors influencing stock price volatility within the Vietnamese market, particularly focusing on the interplays between earnings management, information asymmetry and stock price synchronicity. We apply a Pool Ordinary Least Square Regression (OLS) with random and fixed effects and the Generalised Method of Moment (GMM) model, proposed by Arellano and Bond (1991). Our analysis indicates that earnings manipulation leads to heightened information asymmetry and adversely affects stock price synchronicity, exacerbating stock price volatility. Additionally, while the audit quality and incorporation history are found to have significant effects on earnings management, we found limited effects of foreign ownership on information asymmetry and stock price synchronicity. The third chapter is designed to capture the effects of country-level governance quality indicators (CGQIs) on stock market volatility in the APEC region from 2006 to 2020. We apply the Mixed Data Sampling (MIDAS) approach, developed by Ghysels et al. (2004, 2005, 2007), to address the issue of mixed-frequency data. In detail, by applying the GARCH-MIDAS model, we find that in the short term, the changes in country-level governance quality indicators primarily aggravate stock market volatility across countries in the APEC region. In the long term, the changes in country-level governance quality indicators, including corruption control, regulatory quality, rule of law, voice and accountability, contribute to stabilising the stock market. In contrast, the variations in government effectiveness cause stock market volatility, with the effects primarily observed in developed countries. Only political stability improvements alleviate stock market volatility across developing countries in the long term. Additionally, using the Time-Varying Granger Causality recursive evolving test (TVGC), we find that the linkages between country-level governance quality indicators and stock market volatility are shaped by political influences stemming from countries such as the USA, China and Russia. VIII The fourth chapter uses the Autoregressive Distributed Lag MIDAS (ADL-MIDAS) model to study the repercussions of stock market volatility on income and wealth inequality distributions. We comprehensively consider the effects of the three components of the stock market developments: market accessibility, efficiency, and stability on inequality distributions in the BRICS and G7 countries from 2004 to 2021. We find that the improvements in stock market stability reduce income inequality across countries while widening wealth disparities in the BRICS countries. Additionally, we find that enhancements in market accessibility narrow wealth divergences in the BRICS countries. However, limited effects are observed in the G7 countries. Our empirical evidence indicates a significant role of the stock market in shaping equality distribution, particularly in developing countries. The final chapter encapsulates primary findings and delves into prospective avenues for future research.