Volatility Transmission Among Stock Prices, Exchange Rate, Interest Rate and Gold prices of Pakistan

The study is conducted to determine nature of volatility transmission among four financial markets which are stock prices, exchange rate, interest rate and gold prices of Pakistan through employing the Dynamic Conditional Correlation (DCC) model using daily data from 2008 to 2018. DCC-GARCH is used...

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Bibliographic Details
Published in:Paradigms (Lahore, Pakistan) Pakistan), 2020-06 (S1), p.104-110
Main Authors: Mustafa, Ghulam, Sarwar, Bilal, Badar, Saba
Format: Article
Language:English
Subjects:
Bond markets
Decision making
Foreign exchange rates
Gold
Inflation
Interest rates
Investments
Prices
Securities markets
Stock exchanges
Stock prices
Volatility
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Summary:The study is conducted to determine nature of volatility transmission among four financial markets which are stock prices, exchange rate, interest rate and gold prices of Pakistan through employing the Dynamic Conditional Correlation (DCC) model using daily data from 2008 to 2018. DCC-GARCH is used to forecast future correlations and volatilities. The analysis shows strong volatility transmission among all variables taken except interest rate and exchange rate are those markets whose volatility does not make any impact on each other market volatility. It also implies that market volatility plays a significant role in formulating the dynamic strategies for government, policy makers and investors to minimize their risk level. The result also indicates that gold prices can be used as a hedge against the stock price and exchange rate fluctuations. Results of the study are helpful for policy makers and investors in decision making
ISSN:1996-2800
2410-0854
DOI:10.24312/20000116