Volatility Spillover between Stock and Foreign Exchange Markets: Indian Evidence

Posted: 10 Jun 2008

See all articles by Alok Kumar Mishra

Alok Kumar Mishra

Evalueserve.com Pvt. Ltd.

Davinder K. Malhotra

Thomas Jefferson University

Abstract

The study of volatility spillovers provides useful insights into how information is transmitted from stock market to foreign exchange market and vice versa. This paper explores volatility spillovers between the Indian stock and foreign exchange markets. The results indicate that there exists a bidirectional volatility spillover between the Indian stock market and the foreign exchange market with the exception of S&P CNX NIFTY and S&P CNX 500. The findings of the study also suggest that both the markets move in tandem with each other and there is a long run relationship between these two markets. The results of significant bidirectional volatility spillover suggest that there is an information flow (transmission) between these two markets and both these markets are integrated with each other. Accordingly, financial managers can obtain more insights in the management of their international portfolio affected by these two variables. This should be particularly important to domestic as well as international investors for hedging and diversifying their portfolio.

Keywords: Stock market; Foreign exchange market; Volatility spillovers; Information transmission; ARCH; GARCH; EGARCH

JEL Classification: G15, C32

Suggested Citation

Mishra, Alok Kumar and Swain, Niranjan and Malhotra, Davinder K., Volatility Spillover between Stock and Foreign Exchange Markets: Indian Evidence. International Journal of Business, Vol. 12, No. 3, 2007. Available at SSRN: https://ssrn.com/abstract=1141358

Alok Kumar Mishra (Contact Author)

Evalueserve.com Pvt. Ltd. ( email )

2nd Floor, Unitech World-Cyber Park
Jharsa, Sector-39
Haryana, Gurgaon 122002
India

HOME PAGE: http://www.evalueserve.com

Davinder K. Malhotra

Thomas Jefferson University ( email )

Schoolhouse Lane and Henry Avenue
School of Business Administration
Philadelphia, PA 19144
United States

No contact information is available for Niranjan Swain

Register to save articles to
your library

Register

Paper statistics

Abstract Views
998
PlumX Metrics