Volatility Spillovers across Major Emerging Stock Markets

Abstract

Emerging stock markets of Asia have become a matter of interest for international financial researchers and policy-makers during the last couple of decades. Series of reforms, increasing financial transparency and decreasing restrictions on transactions have made these markets better diversification opportunities for international investors. This paper examines independently as well the linkages of stock markets across the selected Asian countries. The volatility spillover is modelled through an asymmetric multivariate generalized autoregressive conditional heteroscedastic model. In large number of empirical studies of risk return analysis, it is observed that economic stability and good perspectives have been key assets for the development of emerging markets. Diversification of funds to reduce portfolio risk is also one of the point of attraction to domestic and foreign institutional investors. In this work, risk and uncertainty is studied for selected stock markets of emerging economies of Asia. Data of daily stock prices of selected markets is collected for recent decade and detail autoregressive conditional heteroskedasticity (ARCH) and its generalised models are used to estimate conditional and asymmetric volatilities.

Investigating Abnormal Volatility Transmission Patterns Between Emerging and Developed Stock Markets: A Case Study

“…Beirne et al (2013) investigated volatility spillovers and contagion from mature to emerging stock markets using tri-variate GARCH-BEKK models and suggested that spillover parameters change during turbulent while conditional variances in local markets rises, volatility in mature markets rises even much more, and this shift is the main factor behind the increase in conditional correlations. Kumar et al (2018) investigated volatility spillovers across Asian emerging stock markets using an asymmetric multivariate generalized autoregressive conditional heteroscedastic model. The authors concluded that multiple reforms, increasing financial transparency and decreasing restrictions on transactions have transformed these Asian markets into real attractions for international investors in the context of portfolio diversification strategy.…”

Volatility Spillover Between Indian and MINT Stock Exchanges: Portfolio Diversification Implication

“…Policy makers also have keen interest in studying these patterns in order to stabilise their markets as well as bring in more transparency in the systems. The return potential of emerging markets has compelled global portfolio managers to diversify their portfolios by investing in such markets, such as India, China, South Korea, Malaysia and Taiwan (Kumar et al, 2017). However, due to their interlinkages with other major economies, these Asian markets also take on the threat of the volatility spillovers which may negatively affect the returns of global portfolio managers.…”