An asymmetric spillover between China and Pakistan' stock markets: a comparative analysis before and during COVID-19 crisis. (2nd October 2022)

• Record Type: Journal Article
• Authors: Shehzad, Khurram; Xiaoxing, Liu; Kazouz, Hayfa; Balsalobre-Lorente, Daniel; Zeraibi, Ayoub; Rauf, Abdul
• Is Part Of: Journal of sustainable finance & investment. Volume 12:Number 4(2022)
• Page Start: 1265
• Page End: 1284
• Publication Date: 2022-10-02
• Subjects: COVID-19 -- financial stability -- sustainable development -- KSE-100 index -- Shanghai Composite index -- volatility spillover -- VAR-DCC-MEGARCH model; Social responsibility of business -- Periodicals; Sustainable development -- Finance -- Periodicals; 332
• DOI: 10.1080/20430795.2020.1870203
• Languages: English
• ISSNs: 2043-0795

Abstract

ABSTRACT: Novel Coronavirus (COVID-19) has prominently exaggerated the stock markets of the world. It has distraught the financial and economic constancy of the globe. The study scrutinized the non-linear behavior of well-known Chinese and Pakistani stock markets, i.e. the Shanghai Composite Index (SSEC) and the Karachi Stock Exchange (KSE-100 index). The analysis utilized the VAR-DCC-MEGARCH model to determine the returns transmission and volatility spillover pattern of these markets during the standard and COVID-19 era. These results inveterate, during normal circumstances, returns generated in the financial markets of Pakistan expressively control the return movements of SSEC. However, control of Chinese stock markets on Pakistan's stock markets in terms of returns remained insignificant. The research evaluated that volatility spillover between the KSE-100 index and SSEC was insignificant during the stable periods. Nonetheless, the statistics of volatility spillovers during the pandemic era confirmed that instability in the SSEC portentously upsurges the uncertainty of the KSE-100 index. Besides, the study reported a significant leverage effect for both markets during the pandemic era. The study revealed that SSEC is the best resort for Pakistani investors to diversify financial risk.