Asymmetric Volatility Spillover between Stock Market and Foreign Exchange Market: Instances from Indian Market from Pre-, during and Post- Subprime Crisis Periods

2018 ◽  
Vol 19 (6) ◽  
pp. 1567-1579 ◽  
Author(s):  
Gnyana Ranjan Bal ◽  
Amit Manglani ◽  
Malabika Deo
Keyword(s):  
Stock Market ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Spillover Effect ◽  
Subprime Crisis ◽  
Volatility Spillover ◽  
Asymmetric Volatility ◽  
Optimal Portfolio Selection ◽  
Indian Stock Market

Modern businesses are so inter-twined that a cause in one market affects other markets throughout the Globe. The 2008 subprime crisis is one of such evidences of inter-linkage of global markets. Such type of event motivates many studies to analyse the transmission of volatility from one market to another market. The study aims to analyse the volatility spillover effect between CNX Nifty and exchange rates covering for three different currencies, that is, USD, GBP and yen. GARCH (1,1) and EGARCH (1,1) have been used to identify the spillover effect and asymmetries or leverage effect in the volatility transmission through the estimation of different parameters. The overall findings show that there is spillover between the foreign exchange and the stock market. Among the three exchange rates, the USDR is strongly co-related with the Indian stock market as compared to other rates. Our study will significantly contribute to the existing literature in this context. The findings of the study have greater implications especially for hedgers, arbitrators and other participants in this market. As such type of information regarding transmission of volatility can help them to diversify their overseas risk through an optimal portfolio selection.

‘Indian Stock Market Volatility’: A Study of Inter-linkages and Spillover Effects

2019 ◽  
Vol 18 (2_suppl) ◽  
pp. S183-S212 ◽  
Author(s):  
Suparna Nandy (Pal) ◽  
Arup Kr. Chattopadhyay
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Causality Test ◽  
Asymmetric Volatility ◽  
Indian Stock Market ◽  
Domestic Stock

The article attempts to examine interdependence between Indian stock market and other domestic financial markets, namely, foreign exchange market, bullion market, money market, and also Foreign Institutional Investor (FII) trade and foreign stock markets comprising one regional stock market represented by Nikkei of Japan and other stock market for the rest of the world represented by Standard & Poor’s (S&P) 500 of the USA. Attempts are also made to examine asymmetric volatility spillover, first, between the Indian stock market and other domestic financial markets and second, between the Indian stock market and global stock markets (represented by Nikkei and S&P 500) along with the foreign exchange market. To measure linear interdependence among multiple time series of financial markets multivariate Vector Autoregression (VAR) analysis, Granger causality test, impulse response function and variance decomposition techniques are used. For estima-ting the volatility spillover among the aforesaid markets Dynamic Conditional Correlation-Multivriate-Threshold Autoregressive Condi-tional Heteroscedastic (DCC-MV-TARCH) (1, 1) model is applied on daily data for a quite long period of time from 01 April 1996 to 31 March 2012. The results of multi­variate VAR analysis, Granger causality test, variance decomposition analysis and impulse response function estimation establish significant interdependence between domestic stock market and different other financial markets in India and abroad. The results of DCC-MV-TARCH (1, 1) model estimation further show signi- ficant asymmetric volatility spillover between the domestic stock market and the foreign exchange market and also from the domestic stock market to bullion market and changes in gross volume of FII trade. We also find (a) both way asymmetric volatility spillover between the domestic stock market and the Asian stock market and (b) its unidirectional movement from the world stock market to the domestic stock market. The results of the study may help market regulators in setting regulatory policies considering the inter-linkages and pattern of volatility spillovers across different financial markets. JEL Classification: G15, G17

Research on volatility spillover effect between foreign exchange and stock market based on computer simulation multi resolution analysis

2021 ◽  
pp. 1-11
Author(s):  
Ping Zhang ◽  
Shiwei Nan Wang
Keyword(s):  
Computer Simulation ◽  
Exchange Rate ◽  
Stock Market ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Spillover Effect ◽  
Volatility Spillover ◽  
Multi Resolution Analysis ◽  
Resolution Analysis ◽  
Volatility Spillover Effect

In order to analyze the volatility spillover effect between foreign exchange and stock market, this paper adopts the wavelet multi-resolution analysis method of computer simulation. Firstly, aiming at the problem of high and low frequency oscillation and exchange rate de-noising, we adopts the generalized autoregressive conditional heteroskedasticity (GARCH) model to carry out the oscillation correction and exponential modification of the exchange rate denoising signal based on wavelet multi-resolution, and carries out the corresponding decomposition and fitting combined with the wavelet multi-resolution of the state transition GARCH. Then, through the computer simulation of the modified wavelet multi-resolution analysis, this paper studies the volatility spillover effect between the foreign exchange market and the stock market from different scales, so as to explore the simultaneous research from the time domain and frequency domain. The empirical results show that the low-frequency signals of RMB exchange rate volatility (RMB-ERV) and stock price volatility (SPV) have co-integration relationship. It is unique in that the volatility spillover effect in different trading cycles is inconsistent: in the short term, it is mainly manifested in the volatility spillover from the stock market (VS-SM) to the foreign exchange market (VS-FEM); and with the extension of the trading cycle, it shows both sides of effects on the VS.

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

2019 ◽  
Vol 67 (3-4) ◽  
pp. 299-311
Author(s):  
Miklesh Prasad Yadav ◽  
Asheesh Pandey
Keyword(s):  
Stock Market ◽  
Spillover Effect ◽  
Stock Exchanges ◽  
Volatility Spillover ◽  
Conditional Correlation ◽  
Causality Test ◽  
Portfolio Managers ◽  
Vector Auto Regression ◽  
Indian Stock Market ◽  
Auto Regression

We examine the spillover effect from the Indian stock market to Mexico, Indonesia, Nigeria and Turkey (MINT) stock markets in order to check if suitable diversification opportunities are available to global portfolio managers investing in India. We apply Granger causality test, vector auto-regression (VAR) and dynamic conditional correlation (DCC)–MGARCH to investigate the level of integration between India and MINT economies. We observe bidirectional causality between India and Nigeria, unidirectional causality in Mexico and Indonesia, while no causality is found between India and Turkey. Our VAR results suggest that none of the MINT economies impact the return of the Indian stock market; rather returns of the Indian stock market are more affected by their own lagged values. Finally, by applying DCC–MGARCH, we observe that there is no volatility spillover from India to any of the MINT economies. We recommend that portfolio managers investing in the Indian economy may explore MINT economies as possible destinations to diversify their risk. Our study has implications for both academia and portfolio managers.

scholarly journals Asymmetric Volatility in the Nepalese Stock Market

2021 ◽  
Vol 22 (1) ◽  
pp. 41-59
Author(s):  
Dinesh Gajurel
Keyword(s):  
Stock Market ◽  
Spillover Effect ◽  
Equity Markets ◽  
Spillover Effects ◽  
Stock Market Index ◽  
International Equity Markets ◽  
Asymmetric Volatility ◽  
Market Index ◽  
International Equity ◽  
Indian Stock Market

This paper investigates the asymmetric volatility behavior of the Nepalese stock market including spillover effects from the US and Indian equity markets. I modeled asymmetric volatility within a generalized autoregressive conditional heteroskdasticy framework using comprehensive data for the Nepal stock market index. The results reveal a very different asymmetry compared to the results in other international equity markets: positive shocks increase volatility by more than negative shocks. The results further suggest that uninformed investors play a significant role in the Nepalese stock market. The spillover effect from the Indian stock market to the Nepalese stock market is negative. Overall, I conclude that a “fear of missing out” (FOMO) of noise traders as well as the deployment of pump and dump schemes are inherent features of the Nepalese stock market. The findings are very useful to policy makers and investors alike.

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 Volatility Spillover Effect in Indian Stock Market

2017 ◽  
Vol 5 ◽  
pp. 83-101 ◽  
Author(s):  
Surya Bahadur G. C ◽  
Ranjana Kothari ◽  
Rajesh Kumar Thagurathi
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Stock Exchange ◽  
Spillover Effect ◽  
Stock Index ◽  
Global Markets ◽  
Series Data ◽  
Volatility Spillover ◽  
Volatility Transmission ◽  
Indian Stock Market

The study aims to empirically examine the transmission of volatility from global stock markets to Indian stock market. The study is based on time series data comprising of daily closing stock market indices from National Stock Exchange (NSE), India and major foreign stock exchange of the three countries one each from America, Europe and Asia making the highest portfolio investment in Indian stock market. The study period covers 11 years from 1st January, 2005 to 31st December, 2015 comprising a total of 2731 observations. The Indian stock index used is CNX Nifty 50 and the foreign indices are S & P 500 from USA, FTSE 100 from UK, and Nikkei 225 from Japan. The results reveal that the Indian stock market return is co-integrated with market returns of US, UK and Japanese stock markets. Therefore, the return and hence volatility of Indian stock market is associated with global markets which depicts that it is getting integrated with global financial markets. The results provide empirical evidence for volatility transmission or volatility spillover in the Indian stock market from global markets. There exists inbound volatility transmission from US market to Indian stock market. The Indian and UK stock market have bi-directional volatility transmission. However, there exists presence of only outbound volatility transmission from Indian stock market to Japanese stock market. The volatility transmission from global markets to India is rapid with the spillover effect existing for up to three days only.Janapriya Journal of Interdisciplinary Studies, Vol. 5 (December 2016), page: 83-101

Spillover Effects Between Stock Prices and Exchange Rates for the Central and Eastern European Countries

2019 ◽  
pp. 097215091986977 ◽  
Author(s):  
Ngo Thai Hung
Keyword(s):  
Czech Republic ◽  
Stock Market ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Spillover Effects ◽  
Eastern European ◽  
Exchange Market ◽  
The Czech Republic ◽  
Crisis Period

This article attempts to empirically analyze the dynamic relationship and volatility spillover effects between exchange rates and stock returns of the five Central and Eastern European (CEE) countries (Hungary, Poland, the Czech Republic, Romania and Croatia) covering the period 2000–2017 by using the bivariate generalized autoregressive conditional heteroskedasticity-Baba, Engle, Kraft and Kroner (GARCH-BEKK) framework alongside with the constant and dynamic conditional correlation (CCC and DCC) models. The major findings reveal the following: bidirectional volatility spillovers between the two financial markets in Hungary, the Czech Republic and Croatia in the pre-crisis period; unidirectional spillover of volatility from the stock market to foreign exchange market for Poland during the sub-prime crisis period; unidirectional spillover of volatility from the foreign exchange market to the stock market for Hungary in the post-crisis period and Romania in the pre-crisis period; non-persistence volatility spillover between them in case of the Czech Republic, Romania and Croatia in the post-crisis period; the absence of volatility transmission from the stock market to foreign exchange market occurs in Hungary, while from the foreign exchange market to the stock market in case of Poland in the post-crisis period. We further find a short-lived but non-negligible financial contagion between stock and foreign exchange market in these countries. These empirical insights have significant implications for portfolio investments and currency risk hedging.

scholarly journals THE EFFECTS OF VOLATILITY SPILLOVER ON THE LARGEST GLOBAL FINANCIAL MARKET SEGMENTS

2019 ◽  
pp. 319
Author(s):  
Irena Janković
Keyword(s):  
Stock Market ◽  
Foreign Exchange ◽  
Financial Market ◽  
Foreign Exchange Market ◽  
Bond Market ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Market Segments

The aim of the paper is to present and analyse indicators of financial connectedness and volatility spillover on important segments of the global financial market – the stock market, bond market, CDS market, and foreign exchange market. Total, net, and directional measures of volatility spillover are presented and analysed, indicating the level of connectedness of countries’ particular market segments and the level of volatility spillover in periods of crisis and stability.

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