Global Volatility Spillover in Asian Financial Markets

Ishfaq Muhammad, Qiong Zhang Bi and Rehman Awais Ur
Additional contact information
Qiong Zhang Bi: School of Finance, Central University of Finance and Economics, Beijing, China
Rehman Awais Ur: Faculty of Economics and Business, Universiti Malaysia Sarawak, Malaysia

Mediterranean Journal of Social Sciences, 2018, vol. 9, issue 2, 109-116

Abstract: The present paper accommodates the spillover impact of market volatility index of S & P 500 (VIX) and China exchange-traded fund’s volatility (VXFXI) on the emerging equity (KSE-100 index) and foreign exchange markets of Pakistan. In this context, we use a vector autoregressive (VAR) model and impulse response functions (IRF) to explore link among VIX indices and financial markets of Pakistan for the differential time periods. The study concludes that a rise in both VIX and VXFXI results in price falls of KSE-100 index and deteriorates exchange rate market. This implies that VIX act as ‘fear gauge’ on both stock and exchange rate markets in Pakistan. These outcomes provide an imperative implication on the pattern of currency and stock sensitivities against global volatility. This reveals that adverse movements in global volatility in the USA and Chinese financial market have a significant impact and a rise in VIX causes an outflow of investment from financial markets of Pakistan. Moreover, our results may guide local and global investors to anticipate the potential direction of stock and exchange rate markets based on market volatility index.

Keywords: Market Volatility Index; VAR model; Impulse response function; financial markets; Pakistan (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.2478/mjss-2018-0031 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:mjsosc:v:9:y:2018:i:2:p:109-116:n:11

DOI: 10.2478/mjss-2018-0031

Access Statistics for this article

Mediterranean Journal of Social Sciences is currently edited by Alessandro Figus

More articles in Mediterranean Journal of Social Sciences from Sciendo
Bibliographic data for series maintained by Peter Golla ().