Does volatility traverse between emerging and frontier stock markets of Asia?

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Given Asian market recognition at the forefront of the investment domain, the research examines volatility spillover and asymmetric transmission between emerging and frontier stock markets of Asia. Stock returns of two frontier and nine emerging markets, during the data period spanning from August 2000 to March 2020, were analyzed using multivariate asymmetric GARCH-BEKK model around the global financial crisis (GFC). The study results suggest that the structure of cross-markets shocks and volatility spillover between emerging markets are higher during post-GFC. Therefore, this diminishes the possibility of portfolio diversification and investment opportunities to the investors in most of the Asian emerging markets. In the case of Asian frontier markets, most of the volatility generates due to its past shocks and volatility traverse from Asian emerging markets are considerably less. Hence, asset allocations prospects exist in the Asian frontier stock markets. Nevertheless, safe investment strategies need to design to reap diversification benefits from these markets, particularly during financial turmoil and market distress in the future.

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    • Table 1. Classification of stock markets
    • Table 2. Descriptive statistics of the stock returns during pre-global financial crisis
    • Table 3. Descriptive statistics of the stock returns during post-global financial crisis
    • Table 4. Shocks and volatility spillover between stock markets during pre-global financial crisis
    • Table 5. Asymmetric transmission during pre-global financial crisis
    • Table 6. Shocks and volatility spillover between stock markets during post-global financial crisis
    • Table 7. Asymmetric transmission during post-global financial crisis
    • Conceptualization
      Velip Suraj Pavto
    • Data curation
      Velip Suraj Pavto
    • Formal Analysis
      Velip Suraj Pavto
    • Investigation
      Velip Suraj Pavto, Guntur Anjana Raju
    • Methodology
      Velip Suraj Pavto, Guntur Anjana Raju
    • Project administration
      Velip Suraj Pavto, Guntur Anjana Raju
    • Software
      Velip Suraj Pavto, Guntur Anjana Raju
    • Visualization
      Velip Suraj Pavto, Guntur Anjana Raju
    • Writing – original draft
      Velip Suraj Pavto, Guntur Anjana Raju