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 Transmission Of Volatility Shocks Between The Equity And Foreign Exchange Markets In South Africa

2013 ◽  
Vol 29 (5) ◽  
pp. 1529 ◽  
Author(s):  
Lumengo Bonga-Bonga
Keyword(s):  
South Africa ◽  
South African ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Impulse Response Function ◽  
Equity Market ◽  
Stock Market Volatility ◽  
Exchange Market ◽  
Conditional Volatility ◽  
Exchange Markets

<p>The paper assesses the dynamic interaction between exchange rates and stock market volatility in South Africa by making use of the generalised impulse response function obtained from a bivariate VAR model. Volatility variables in the VAR system are obtained from a family of GARCH models based on criteria such as covariance stationarity and leverage effects. The findings of the paper show that foreign exchange conditional volatility responds positively to volatility shocks to the equity market. Nonetheless, the response of the equity market conditional volatility to volatility shocks to the foreign exchange market is short-lived and neutral for most of the time horizon periods. The paper attributes this finding mainly to the extent of foreign participation in emerging equity market in general and the South African equity market in particular.</p>

‘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

scholarly journals The Uncovered Interest Rate Parity Anomaly And Foreign Exchange Market Turnover

2012 ◽  
Vol 11 (3) ◽  
pp. 299 ◽  
Author(s):  
John F. Boschen ◽  
Kimberly J. Smith
Keyword(s):  
Interest Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Foreign Exchange Markets ◽  
Exchange Market ◽  
Interest Rate Parity ◽  
High Interest Rate ◽  
Uncovered Interest Rate Parity ◽  
Exchange Markets ◽  
Rate Parity

The uncovered interest rate parity (UIP) anomaly is that high interest rate currencies appreciate, rather than depreciate, against low interest rate currencies. We show that the UIP anomalies apparent in six major currency pairs have diminished over our 1995-2010 sample period. We further show that the observed decline in deviations from UIP is associated with the substantially higher transaction volume now present in the foreign exchange markets. We interpret our findings as consistent with the proposition that the UIP anomaly dissipates as the foreign exchange markets become more efficient.

scholarly journals A Study on Investors Awareness about Equity and Currency Market in Private Sectors

2021 ◽  
Vol 9 (1) ◽  
pp. 34-38
Author(s):  
Ms. Latha ◽  
K S Bhavani Devi
Keyword(s):  
Stock Market ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Central Banks ◽  
Business Owners ◽  
Market Manipulation ◽  
Separate Entity ◽  
Exchange Market ◽  
Good Relationship ◽  
Currency Market

The study was conducted to examine the awareness among the investors about equity and currency market. The study was useful to identify the investors’ mentality towards stock market. The researcher could gain knowledge about equity and currency market. As well, it’s also helpful in creating a good relationship with the investors. At the beginning of a business, owners put some effort to finding the finance assets into the business. This creates the shape of the capital on the business liability to a separate entity from its owners. Although, the foreign exchange market is isolated comparing to other than this. Nevertheless market manipulation of central banks by the foreign exchange market has to be mentioned to the nearest ideal perfect completion.

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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