Geopolitical Risks and Stock Market Volatility in the SAARC Region

Panazan Oana, Gheorghe Catalin () and Calefariu Emilia
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Panazan Oana: Department of Engineering and Industrial Management, Transilvania University of Brasov, Eroilor Street 29, Brasov, 500036, Romania
Gheorghe Catalin: Department of Engineering and Industrial Management, Transilvania University of Brasov, Eroilor Street 29, Brasov, 500036, Romania
Calefariu Emilia: Department of Engineering and Industrial Management, Transilvania University of Brasov, Eroilor Street 29, Brasov, 500036, Romania

Economics - The Open-Access, Open-Assessment Journal, 2024, vol. 18, issue 1, 15

Abstract: This study examined the stock market volatility of the member states of the South Asian Association for Regional Cooperation (SAARC) and geopolitical risk (GPR). The analysis period covered January 2014 to March 2024, and the time–frequency wavelet method was used to process the data. The time-varying parameter vector autoregression and spatial autoregressive models helped determine the dynamic connectedness of volatility in the analyzed states. The findings revealed similar stock market connections in Bangladesh and India. In addition, a comparative analysis of stocks in India and Pakistan led to the identification of common elements. The connection between geopolitical concerns and Sri Lankan stocks was the strongest and increased in intensity after 2019. GPR and Nepal’s stock market maintained a continuous but low-intensity relationship. The dynamic connectedness between member states’ stock markets was limited during the review period. The study results could encourage SAARC governments to bridge their political differences to ensure that South Asia becomes a strong partner in the global economy. Equally, our results can benefit investors, financial institutions, regulatory authorities, and governments.

Keywords: South Asia; stock return; GPR; wavelet; TVP-VAR; SAR (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:econoa:v:18:y:2024:i:1:p:15:n:1023

DOI: 10.1515/econ-2022-0124

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