Volatility Spillover in Foreign Exchange Markets

Paradigm ◽  
2015 ◽  
Vol 19 (2) ◽  
pp. 137-151 ◽  
Author(s):  
Rajni Kant Rajhans ◽  
Anuradha Jain
Keyword(s):  
Foreign Exchange ◽  
Foreign Exchange Markets ◽  
Volatility Spillover ◽  
Exchange Markets

Examining Volatility Spillover Between Foreign Exchange Markets and Stock Markets of Countries such as BRICS Countries

2021 ◽  
pp. 097215092110205
Author(s):  
Dharmendra Singh ◽  
M. Theivanayaki ◽  
M. Ganeshwari
Keyword(s):  
South Africa ◽  
Stock Market ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Foreign Exchange Markets ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Currency Market ◽  
Brics Countries ◽  
Exchange Markets

The objective of this article is to examine the volatility spillover effect between the foreign exchange market and the stock market of Brazil, Russia, India, China and South Africa (BRICS) countries along with Japan as the developed country in the region, affecting the BRICS countries. Generalized Autoregressive Conditionally Heteroscedastic (GARCH) (1,1) method is used to study the volatility between the stock market and the foreign exchange market in selected countries, and asymmetric model, that is, Exponential Generalized Autoregressive Conditional Heteroscedasticity—EGARCH (1,1) is also used to investigate the presence of leverage effects in both stock market and foreign exchange market in selected countries. GARCH findings suggest a two-way volatility spillover between the stock market and foreign exchange markets for India, China and South Africa. In BRICS countries, volatility spillover from the currency market to the stock market is seen as more evident and robust as compared to spillover from the stock market to the currency market. A positive asymmetry in spillover is also observed from the foreign exchange market to the stock market. The findings of the study may provide valuable information to investors for decision-making in international portfolio investment and also for economic policymakers for their financial stability perspective.

scholarly journals RMB Exchange Rates and Volatility Spillover across Financial Markets in China and Japan

Risks ◽  
2018 ◽  
Vol 6 (4) ◽  
pp. 120 ◽  
Author(s):  
Fengming Qin ◽  
Junru Zhang ◽  
Zhaoyong Zhang
Keyword(s):  
Financial Markets ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Stock Markets ◽  
Spillover Effects ◽  
Policy Implications ◽  
Foreign Exchange Markets ◽  
Volatility Spillover ◽  
Exchange Markets ◽  
China And Japan

This study examines empirically the volatility spillover effects between the RMB foreign exchange markets and the stock markets by employing daily returns of the Chinese RMB exchange rates and the stock markets in China and Japan during the period in 1998–2018. We find evidence that there exist co-volatility effects among the financial markets in China and Japan, and the volatility of RMB exchange rates contribute to the co-volatility spillovers across the financial markets. Reversely, the return shock from the stock markets can also generate co-volatility spillover to the foreign exchange markets. The bidirectional relationship reveals that both the fundamental hypothesis and the investor-induced hypothesis are valid. Our estimates also show that the spillover effects led by the stock market in Japan are stronger than that from the foreign exchange markets and the Chinese stock markets, implying that market with higher accessibility has greater spillover effects onto other markets. We also found that the average co-volatility spillover effects among the RMB exchange markets and the stock markets in Japan and China are generally negative. These findings have important policy implications for risk management and hedging strategies.

Returns and volatility spillover between stock prices and exchange rates

2013 ◽  
Vol 8 (2) ◽  
pp. 108-128 ◽  
Author(s):  
Manish Kumar
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Stock Prices ◽  
Multivariate Garch ◽  
Foreign Exchange Markets ◽  
Volatility Spillover ◽  
Content Type ◽  
Volatility Spillovers ◽  
Exchange Markets

PurposeThe purpose of this paper is to analyze the nature of returns and volatility spillovers between exchange rates and stock price in the IBSA nations (India, Brazil, South Africa).Design/methodology/approachThe study uses VAR framework and the recently proposed Spillover measure of Diebold and Yilmaz to examine the returns and volatility spillover between exchange rates and stock prices of IBSA nations. In addition, multivariate GARCH with time varying variance‐covariance BEKK model is used as a benchmark against the spillover methodology proposed by Diebold and Yilmaz.FindingsThe results of multivariate GARCH model suggests the integration between stock and foreign exchange markets and indicates the existence of bi‐directional volatility spillover between stock and foreign exchange markets in the IBSA countries. Spillover results using the Diebold Yilmaz model suggest the bi‐directional contribution between stock and foreign exchange market, in terms of both returns and volatility spillovers. Overall, results confirm the presence of returns and volatility spillovers within the IBSA nations and, in particular, the stock markets play a relatively more important role than foreign exchange markets in the first and second moment interactions and spillovers.Practical implicationsThe market participants may consider the relationship between the exchange rate and stock index to predict the future movement of each other effectively. Multinational companies interested in exchange rate forecasting may consider the stock market as an important attribute. There is an interesting implication for portfolio managers too because of the spillover stock and foreign exchange markets. This knowledge would help to create a fund which performs well. Moreover, the paper can help regulators and policy makers in IBSA nations to understand the structure of the market in a better way and then design their policies.Originality/valueThe study contributes to the literature by extending the existing studies on the spillover between stock price and exchange rate by investigating the issue for three emerging economies, India, Brazil and South Africa. Unlike most studies in the literature which focus on multivariate GARCH model, this is the first study which explores the issue of returns and volatility spillover between the stock prices and the exchange rates using spillover measure of Diebold and Yilmaz and much longer and recent daily data. Moreover, multivariate GARCH with time varying variance‐covariance BEKK model is used as a benchmark against the spillover methodology proposed by Diebold and Yilmaz.

Sign in / Sign up

Export Citation Format

Share Document