STOCK MARKET CO-INTEGRATION AND VOLATILITY SPILLOVERS IN SOUTH AND EAST ASIA: DO INTERNATIONAL RELATIONS MATTER?

Khan Sabeen Khurram; Muhammad Umer Quddoos; Kousar Humaira; Siddiqi Arslan Ahmad

Authors

Sabeen Khurram Khan Assistant Professor, Department of Management Sciences, COMSATS University, Islamabad, Pakistan.
Dr Muhammad Umer Quddoos Associate Professor, Department of Commerce, Bahauddin Zakariya University, Multan, Punjab, Pakistan (Corresponding Author).
Humaira Kousar Lecturer, Department of Management Sciences, COMSATS University, Islamabad, Pakistan.
Arslan Ahmad Siddiqi Chief Regional Officer, ConnecTech Private Limited, Islamabad, Pakistan.

Keywords:

Portfolio Diversification; Volatility Transmission; Co-Integration; Stock Market; Stock Spillover.

Abstract

The main objective of this study is to examine the level of co-integration between Asian stock markets of China, India, Pakistan, and Sri Lanka. This study also investigates volatility spillover between the stock markets of the above-mentioned countries in the context of their foreign relations with each other. The question is multi-dimensional in its nature, but this study focuses only on the behavior of equity markets in investigating the research problem- whether volatility transmits among the selected Asian equity markets and from developed markets, namely, the USA, the UK, Japan, and Singapore, and whether the political relations among the states can cast influence upon trends and behavior of the stock markets of the countries. No pairwise long-run relationships appear to exist between above four Asian markets, and they are not co-integrated pairwise with the equity markets of the USA, UK, Japan, and Singapore. Therefore, fund managers of the US, UK, Singapore, and Japan can get the benefits of portfolio diversification by investing in Asian stock markets.

JEL Classification: G15, G11, G17, C32, C58

D.O.I. https://doi.org/10.5281/zenodo.23149486

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