Mechanism of Volatility Spillover Between Stock, Currency, and Commodity Markets of Pakistan

Abstract

This research aims to examine the mechanism of volatility transmission between stock, currency, and commodity markets of Pakistan. For this purpose, daily data covering the period August 4, 1997 to August 31, 2016 is analysed. Empirical investigation is conducted by using EGARCH model. The strength of the study is analysis of the commodity market together with stock and currency markets of Pakistan. Results of the EGARCH model suggests that bidirectional volatility spillover exists between all the bivariate cases of the three markets except in the case of volatility spillover from the currency market to the commodity market. JEL Classifications: Q43, G10, C13, F31, F36 Keywords: Stock, Currency and Commodity Markets, Volatility Spillover, EGARCH Mode