Asymmetric Volatility in Nepalese Stock Market
Journal of Comparative International Management, Vol 22(1)
37 Pages Posted: 4 Dec 2020
Date Written: 2019
This paper investigates the asymmetric volatility behavior of Nepalese stock market including the spillover effects from the US and Indian equity markets. We model asymmetric volatility within generalized autoregressive conditional heteroscedasticity framework using a comprehensive data for Nepal stock market index. The results reveal a very different asymmetry compared to the results in other international equity markets: positive shocks increase volatility by more than negative shocks. Our results further suggest that uninformed investors play a significant role in Nepalese stock market. The spillover effect from the Indian stock market to Nepalese stock market is negative. Overall, we conclude that a “fear of missing out” (FOMO) of noise traders as well as the deployment of pump and dump schemes are inherent features of the Nepalese stock market. The findings are very useful to policy makers and investors alike.
Keywords: Asymmetric Volatility, Nepal Stock Exchange
JEL Classification: G10, G14, G15
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