The effect of financial, macroeconomic and sentimental factors on stock market volatility

The aim of this paper is to find economic factors that could be helpful in explaining the market’s shifts between periods prosperity and crisis. study took into account main stock indices from developed markets USA, Germany Great Britain, two emerging markets, i.e. Poland Turkey. analysis confirms existence different states volatility these namely state with a positive returns’ mean low volatility, negative or insignificant high volatility. Markov-switching model dynamic probability matrix was applied study. subject impact domestic global factors, such as VIX TED spread, oil prices, sentiment (ZEW), macroeconomic (unemployment, longterm interest rate, CPI), on switching states. authors concluded all examined countries, changes long-term rates have an influence market returns. However, direction for markets. As regards prices oil, 10-year bonds, ZEW index can suggest countries remaining first state, whereas increase spread significantly reduces staying state. other studied proved rather local nature.