AN ASSESSMENT OF VOLATILITY TRANSMISSION IN THE PAKISTAN, INDIA AND SRI LANKA STOCK MARKETS USING BEKK-GARCH MODEL.
Journal Title: International Journal of Advanced Research (IJAR) - Year 2019, Vol 7, Issue 6
Abstract
This paper inspects the dynamics of volatility and volatility co-movement among Pakistan (KSE-100), India (BSESN) and Sri Lanka (CSE) stocks markets. The volatility and cross-volatility are modeled via BEKK-GARCH model using daily returns indices of the selected stock markets from January, 2011 to January, 2019. Empirical analysis reveals that BEKK-GARCH (1,1) model is found to be appropriate as it has less number of parameters (parsimony). The value of GARCH parameter is high in BSESN which indicates that Indian stock market is highly persistent. This shows that if shocks occur it will take a long time to die out from the market dilemma. However, the coefficient of GARCH has minimum value in KSE-100 among all. On the other hand, the value of short run shock (ARCH coefficient) is high in CSE. This suggests that volatility is more sensitive to past market events for a short period of time. The strongest cross-market effect is detected between India and Sri Lanka. On the contrary, the volatility co-movement is high between Pakistan and Sri Lanka.
Authors and Affiliations
Samreen Fatima and MudassirUddin.
Keywords
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- EP ID EP611317
- DOI 10.21474/IJAR01/9202
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