Dynamics of volatility spillover between stock market and foreign exchange market: evidence from Asian Countries

Background:The purpose of this study is to examine volatility spillover effects between stock market and foreign exchange market in selected Asian countries;Pakistan,India,Sri Lanka,China,Hong Kong and Japan.This study considered daily data from 4th January,1999 to 1st January,2014.Methods:This study opted EGARCH(Exponential Generalized Auto Regressive Conditional Heteroskedasticity)model for the purpose of analyzing asymmetric volatility spillover effects between stock and foreign exchange market.Results:The EGARCH analyses reveal bidirectional asymmetric volatility spillover between stock market and foreign exchange market of Pakistan,China,Hong Kong and Sri Lanka.The results reveal unidirectional transmission of volatility from stock market to foreign exchange market of India.The analysis reveals no evidence of volatility transmission between the two markets in reference to Japan.Conclusions:The result of this study provide valuable insights to economic policy makers for financial stability perspective and to investors regarding decision making in international portfolio and currency risk strategies.

Dynamics of oil price shocks and stock market behavior in Pakistan:evidence from the 2007 financial crisis period

Background:The aim of this study is to investigate the effect of the oil price and its volatility on the stock market of Pakistan before and after the 2007 financial crisis period.Methods:The analyses are carried out on daily data for the period from July 31,2000 to July 31,2014.This study uses several econometric techniques for the analyses,namely,the Johansen-Juselius cointegration test,generalized autoregressive conditional heteroskedasticity(GARCH)model,exponential generalized autoregressive conditional heteroskedasticity(EGARCH)model,variance decomposition method,and impulse response function.Results:The results of the cointegration method indicate a significant long-run association between stock market and oil prices in the pre-crisis period.The EGARCH model shows that oil price returns have a significant effect on stock market returns in both sub-periods,while the result for the GARCH model is significant only in the postcrisis period.We find a significant effect of oil price volatility on the stock market in both sub-periods from the GARCH model.Furthermore,the EGARCH model shows an asymmetric effect of oil price volatility on the stock market in the pre-crisis period.Variance decomposition shows that stock market variations are mostly explained by selfinnovation.Moreover,the impulse response function results show that oil price shocks affected the stock market adversely in the pre-crisis period but positively in the postcrisis period.Conclusions:This study suggests that economic policymakers and investors should consider the oil price as an important factor affecting stock market returns.

Debt choice, growth opportunities and corporate investment: evidence from China

The study aims to investigate how relying on short-term debt may help Chinese listed firms to make efficient investment decisions and reduce overinvestment problem for low-growth firms.The study uses a large set of panel data of nonfinancial Chinese listed firms over the period 2007–2017 and,using the robust twostage generalized method of moments,which is robust to unobserved heterogeneity of individual firms and addresses endogeneity issues.Findings show a positive relationship between growth and investment;this association is enhanced by leverage,especially for high-growth firms.This supports the view that short-term debt helps Chinese firms to make optimal use of leverage and therefore make better investment decisions.Furthermore,the results reveal that leverage plays a disciplining and monitoring role to reduce overinvestment incentive for low-growth firms.Overall,the study suggests that shareholders should consider short-term debt to mitigate the debt overhang problem and restrict the opportunistic behavior of managers,which can lead to efficient investment decisions.It also provides foreign investors insights about capital structure in China,and how it can help them make better investment decisions.

Determinants of corporate cash holdings in tranquil and turbulent period:evidence from an emerging economy

Using a sample of 280 firms listed on the Pakistan Stock Exchange,we empirically investigate factors that determine corporate cash holdings in different periods from 2005 to 2014.We divide the sample into three sub-periods—pre-crisis,crisis,and post-crisis—and apply a panel data model to estimate the results.The results suggest that financial crises affect firms’cash holdings policies.Further,findings show that financial crisis has influenced the relationship of size and leverage with cash holdings.In particular,cash flow,liquidity,and tangibility are major determinants of cash holdings in the sub-periods.We present important implications for corporate managers,academicians,and policymakers.

Examining volatility spillover between Asian stock markets

This study examined the volatility spillover effects between Asian stock markets,i.e.,Pakistan,India,Sri Lanka,China Mainland,Japan and China Hong Kong.The daily data was considered from the period 4^(th) January,1999 to 1^(st) January,2014,consisting 5 trading days from Monday to Friday.The volatility spillover between stock markets was captured by using GARCH(generalized auto regressive conditional heteroskedasticity)model.The empirical analyses show evidence of significant bidirectional spillover of return and volatility between China Mainland and Japan.The results also show significant bidirectional volatility transmission between the following equity markets;China Hong Kong and Sri Lanka,China Mainland and Sri Lanka.The significant unidirectional transmissions of stock market volatility are found to be flowing from;India to China Mainland,Sri Lanka to Japan,Pakistan to Sri Lanka,China Hong Kong to India and Japan.These results are important for economic policy makers in order to safeguard the financial sector from international financial shocks.The investors can use this information for making efficient portfolio which will reduce their risk and enhance their returns.