REYES, Enrico Luis M.

BPA 2-3
Macroeconomics
Reflection Paper #4
Capturing the Short-run and Long-run Causal Behavior of Philippine Stock Market
Volatility under Vector Error Correction Environment
Aileen L. Camba, Abraham C. Camba, Jr.
Upon reading the study, Knowledge about the Philippine capital market were served which
taught me that it has a wide spectrum of competitive shifts in a number of ways. As it was used,
Volatility implies sudden and abrupt shifts. The Philippine Stock Market may differ due to natural
disasters such as earthquakes, typhoons, or with what’s relevant today, during a pandemic.
The study implies that during certain times, environment factors contribute to the Volatility
of the Philippine stock Market. As cited in the study, A highly volatile stock market means that
prices or returns fluctuates enormously over a specific time. That is, volatility can be considered
as a measurement of the uncertainty associated with stock market investment decisions and
understanding the nature of volatility patterns of the stock market can be used as a reference to
pricing, hedging strategy and risk management (Tu & Liao, 2020). With the presented data and
claims, I can say that I agree! As stated in their conclusion, the above results would be a perfect
guide. Understanding the short-term and long-term fluctuations of the Philippine stock market
index, this is because, the methods done to support and evidently justify their initial theory
provides accuracy and logical outcomes. While there still some research gaps that can be extracted,
I’d like to believe that it had successfully address provided the necessary answers to the problems
raised in the causal behavior of Philippine Stock Market Volatility. Vector Error Correction
Environment suits the study well for it can be utilize to determine the direction of causality between
the variables. If there is a cointegration between the variables. This technique is known as the
Granger amplified causality test. In this method, the VAR system is applied to the error correction
word (ECT). The t-statistic importance of the ECT parameter suggests that there is proof of the
presence of long-term relationships and long-term causality between variables.
In conclusion, upon synthesizing the study, I come to realize that findings in this research
can be utilize by investors to address any risk or hazards that may arise. Investors should look at
the systematic risks revealed by the Peso-Dollar exchange rate, London Interbank Offered Rate,
and crude oil prices when structuring portfolios and diversification investment strategies in the
Philippine stock market. This study indicates that stock market uncertainty is understandable in
light of the rapid changes in world capital markets. Adjustments and adaptation might be taken in
consideration. In comparison to mature stock markets in industrialized economies, stock markets
in less developed economies such as the Philippines have only begun to grow rapidly in the last
two decades which affects its view as a country from other international economic environment.