Volatility Spillover Effects across Emerging Equity Markets of Pakistan, India, China and Bangladesh: A Multivariate GARCH-BEKK and CCC Approach

Abstract

The purpose of this empirical study is to identify the Volatility Spillover Effects across Emerging Equity Markets of Pakistan, India, China and Bangladesh for the period of Jan 2000 to Dec 2015 on daily data basis. Historical volatility Granger Causality, Spillover Effect model, Multivariate GARCH-BEKK model and MGARCH-CCC is used for this purpose. It is concluded that large negative shifts in volatility occur more often than positive shifts in volatility and large changes occur often over this period and there exist strong triangular effect among KSE to BSE then BSE to SS and SS to KSE. Empirical evidence indicates that GARCH parameters capture the response of volatility in KSE, BSE, SS and DSE. However KSE to BSE have significant spillover effect and BSE has significant spillover effect to SS and DSE. It is evident from the results that markets own spillovers are greater than the cross-market spillovers.