Spillover Effect between Stock and Currency Markets: An Empirical evidence from Developed and Developing Economies

Abstract

Volatility Spillover between currency and equity markets has gained much attention for academicians and policy makers in recent era. Many studies has been conducted on this relationship in developed economies. But in this study, we use daily time series data from G8+5 countries and Pakistan for the 2000-2016 and apply DCC-GARCH to check the sign and magnitude of spillover effect between currency and equity markets. Results have shown that Brazil, Germany, USA, UK, Russia, South Africa, Pakistan, Japan, Italy, India, France and Canada has positive spillover between these two markets. Mexico and China reported no spillover between these two markets.