Are the Bourses of India and Asian Tiger Cubs Inter Linked?

Authors

  • Ashish Kumar University School of Management Studies, Guru Govind Singh Indraprastha University, India
  • Swati Khanna Faculty of Finance and Accounting IILM Institute of Higher Education, India

Keywords:

Asian Tiger Cubs, GARCH BEKK Model, Vector Auto Regression, Impulse Response, Variance Decomposition, Granger Causality

Abstract

The study examines the volatility linkages between India and Asian tiger cubs, i.e., the Philippines, Indonesia, Malaysia, and Thailand. It aims to explore the spillover effects of volatility among these countries' stock markets to provide valuable insights to investors and policymakers. To study the spillover effect, we examined daily returns for the benchmark indices of the stock markets of these countries for an extended period of 17 years from 2002 to 2019. The study period comprises of Whole Study Period, Global Crisis Period, Eurozone Crisis Period, and Rupee Depreciation Period. The methodology comprises of Granger Causality Test, Vector Auto Regression (VAR) model, and GARCH BEKK model. Asian stock markets were worst hit by the Global Financial Crisis and least affected by Eurozone Crisis. The rupee’s depreciation period also influenced the returns of Asian stock markets. Bidirectional and unidirectional relationships are observed between India and Asian Tiger cubs for the whole study period, Global Crisis period, Eurozone Crisis Period, and Rupee Depreciation Period. Understanding the causal pattern between economic growth and stock market volatility will allow investors to estimate potential stock market movements. Analysis indicates that the observed capital markets are mutually affected, but not to a greater degree. This leads us to two significant conclusions. Firstly, this means that there are ways for investors to diversify into Indian and Asian Tiger cub stock exchanges. Secondly, national factors (macroeconomic variables) affect capital markets, and market shocks are also affected by information from the past that is specific to the respective markets.

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Published

2022-05-02

How to Cite

Kumar, A., & Khanna, S. (2022). Are the Bourses of India and Asian Tiger Cubs Inter Linked?. Thailand and The World Economy, 40(2), 102–126. Retrieved from https://so05.tci-thaijo.org/index.php/TER/article/view/258997