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Business Review

Abstract

This study examines the volatility transmission between the currency market and the stock market of Pakistan in the presence of structural breaks. For this purpose, daily data from the stock market and currency market is analyzed. An empirical investigation is conducted using the bivariate EGARCH model and the test for multiple structural breaks developed by Bai and Perron (2003). This study analyses these markets with the inclusion of sudden changes. Results of the EGARCH model suggest that volatility spillover is positive and bidirectional between these markets of Pakistan.

Keywords

Volatility Spillover, Bai and Perron test, EGARCH Model

Journal of Economic Literature Subject Codes

G10, F31

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Published Online

August 17, 2021

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