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Global Volatility Spillover in Asian Financial Markets

Author

Listed:
  • Ishfaq Muhammad
  • Qiong Zhang Bi

    (School of Finance, Central University of Finance and Economics, Beijing, China)

  • Rehman Awais ur

    (Faculty of Economics and Business, Universiti Malaysia Sarawak, Malaysia)

Abstract

The present paper accommodates the spillover impact of market volatility index of S & P 500 (VIX) and China exchange-traded fund’s volatility (VXFXI) on the emerging equity (KSE-100 index) and foreign exchange markets of Pakistan. In this context, we use a vector autoregressive (VAR) model and impulse response functions (IRF) to explore link among VIX indices and financial markets of Pakistan for the differential time periods. The study concludes that a rise in both VIX and VXFXI results in price falls of KSE-100 index and deteriorates exchange rate market. This implies that VIX act as ‘fear gauge’ on both stock and exchange rate markets in Pakistan. These outcomes provide an imperative implication on the pattern of currency and stock sensitivities against global volatility. This reveals that adverse movements in global volatility in the USA and Chinese financial market have a significant impact and a rise in VIX causes an outflow of investment from financial markets of Pakistan. Moreover, our results may guide local and global investors to anticipate the potential direction of stock and exchange rate markets based on market volatility index.

Suggested Citation

  • Ishfaq Muhammad & Qiong Zhang Bi & Rehman Awais ur, 2018. "Global Volatility Spillover in Asian Financial Markets," Mediterranean Journal of Social Sciences, Sciendo, vol. 9(2), pages 109-116, March.
    • Handle: RePEc:vrs:mjsosc:v:9:y:2018:i:2:p:109-116:n:11
    DOI: 10.2478/mjss-2018-0031
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    Cited by:

    1. Vinay Prasad Mandal & Raihan Ahmad & Sufia Rehman & Md Masroor & Haroon Sajjad, 2019. "Exploring optimal cereal crop sequence using cultivated land utilization index and yield in Katihar district, India: a sub division level analysis," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 9(1), pages 62-81, June.
    2. Arendt, Rosalie & Muhl, Marco & Bach, Vanessa & Finkbeiner, Matthias, 2020. "Criticality assessment of abiotic resource use for Europe– application of the SCARCE method," Resources Policy, Elsevier, vol. 67(C).
    3. Kseniia GOROVA & Oleksandr DLUHOPOLSKYI & Tetiana DLUHOPOLSKA, 2019. "Entering In The Global Manufacturing Outsourcing Market And Innovative Development Of The Ukrainian Industrial Enterprises," ECONOMY AND SOCIOLOGY: Theoretical and Scientifical Journal, Socionet;Complexul Editorial "INCE", issue 2, pages 20-31.

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