Volatility Spillovers between South Asian Stock Markets: Evidence from Sri Lanka, India and Pakistan
Yeshan Withanage and
MPRA Paper from University Library of Munich, Germany
This study examines the existence, magnitude and direction of volatility spillovers between the Sri Lankan stock market and two other major stock markets in the South Asian region: India and Pakistan. Main stock indices of Sri Lanka, India, and Pakistan are employed as proxies to represent stock markets of each country. Daily data over the period 2nd January 2004 to 23rd September 2014 is used for estimations. Volatility spillovers are modeled through a trivariate BEKK – GARCH (1, 1) model to capture the cross-market effects. There exist bilateral intraday volatility spillovers between Sri Lanka and both markets. It is evident that the intraday effect from Pakistan to Sri Lanka is stronger than the same effect from India to Sri Lanka. However, with respect to overnight volatility spillovers, there is only a unilateral spillover effect from Sri Lanka to India. Evidence for the presence of volatility spillovers between these three South Asian economies makes the tasks of monetary policy makers, investors and fund managers more complicated than they would otherwise have been.
Keywords: Volatility spillovers; South Asian stock markets; Multivariate GARCH models; BEKK models (search for similar items in EconPapers)
JEL-codes: G10 G12 G15 (search for similar items in EconPapers)
Date: 2017-08, Revised 2017-11
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Published in Sri Lanka Journal of Economic Research 1.5(2017): pp. 79-94
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:82782
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