Volatility spillovers among MIST stock markets

Abstract

<abstract> <p>This paper examines the effects of volatility spillover between MIST stock markets. We used daily data from January 3, 2012, to November 16, 2021, and the test of causality in variance, including structural breaks. First, we observed no structural break for Turkey and Indonesia, but there is a structural break in each South Korean and Mexican stock markets. A structural break is found for Mexico the day, aka "El Betito" was arrested. Likewise, we detected a structural break on the first day of the Covid-19 case for South Korea. We surprisingly observed that Covid-19 did not cause a structural break in these markets during the period analyzed, except in South Korea. GARCH (1, 1) models, including structural breaks, show that all series are temporarily and permanently affected by their own shocks. The causality in variance test reveals that MIST countries have volatility spillover effects on each other. There is bidirectional causality in variance between all markets, except South Korea and Mexico. The Mexican stock market is a volatility transmitter for South Korea, but vice versa. The paper indicates a connection in terms of the financial markets of MIST countries, and they are affected by each other's shocks, according to the study results.</p> </abstract>