Title: Exploring the transmission and determinants of volatility shocks in emerging South-Asian markets

Authors: Pranab K. Pani; Hameedah Sayani

Addresses: SP Jain School of Global Management, Dubai Campus, UAE ' Mohammed Bin Rashid School of Government, Dubai, UAE

Abstract: The transmission of volatility shocks in two prominent South Asian markets is analysed to identify whether shocks in these markets overlap and are associated with any global or national events. This study attempts to provide an insight into the interdependence between these markets and their interaction with the US market. The data is analysed using multiple methods. First, the iterated cumulative sum of squares (ICSS) algorithm is employed to determine shocks in the returns series and then examined to understand their domestic/global scope. A modified version of GARCH (1, 1), is used to determine the impact of events on volatility persistence. The study reveals that the shocks in important stock indices associate mostly with country-specific or regional political and/or economic events. The assimilation of shocks in the GARCH (1, 1) model improves the volatility measures only in two of the candidate markets.

Keywords: BSE30; KSE100; ICSS algorithm; emerging market; GARCH (1, 1); break points; stock exchange; South-Asian markets; volatility shocks.

DOI: 10.1504/IJEPEE.2021.116453

International Journal of Economic Policy in Emerging Economies, 2021 Vol.14 No.4, pp.392 - 414

Received: 01 Jun 2019
Accepted: 25 Mar 2020

Published online: 30 Apr 2021 *

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