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Crude oil, stock market, and foreign exchange return volatility and spillover: a GARCH DCC analysis of Indian and Japanese financial market

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  • Amritkant Mishra

Abstract

This research article strives to examine the return volatility, co volatility and spillover impact of stock exchange, foreign exchange as well as crude oil in Indian and Japanese financial market which are two pertinent, Asian economies by using generalised autoregressive conditional heteroskedasticity dynamic conditional correlation (GARCH-DCC) and variance decomposition techniques by considering daily trading data of ten years from 2007 to 2017. The result of GARCH-DCC analysis shows the evidence of ARCH and GARCH effect on the return of all the variables, furthermore it unearths that return of all the variables, is not moving away from its mean in long run and persistent for a long time at leaning process in both this country. The consequence of volatility spillover proves that return on foreign exchange is a net transmitter of volatility while the return of stock exchange is a net receiver of volatility in the Indian financial market. As per as Japanese financial market is concerned it can be inferred that return of stock market is dominant variable as it is a net contributor of volatility to the other variables while foreign exchange market is mostly affected variable as it is a net receiver of volatility.

Suggested Citation

  • Amritkant Mishra, 2019. "Crude oil, stock market, and foreign exchange return volatility and spillover: a GARCH DCC analysis of Indian and Japanese financial market," International Journal of Business Innovation and Research, Inderscience Enterprises Ltd, vol. 20(1), pages 25-46.
    • Handle: RePEc:ids:ijbire:v:20:y:2019:i:1:p:25-46
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    Cited by:

    1. Ben-Salha, Ousama & Mokni, Khaled, 2022. "Detrended cross-correlation analysis in quantiles between oil price and the US stock market," Energy, Elsevier, vol. 242(C).
    2. Mila Andreani & Vincenzo Candila & Giacomo Morelli & Lea Petrella, 2021. "Multivariate Analysis of Energy Commodities during the COVID-19 Pandemic: Evidence from a Mixed-Frequency Approach," Risks, MDPI, vol. 9(8), pages 1-20, August.
    3. Ghaemi Asl, Mahdi & Adekoya, Oluwasegun Babatunde & Rashidi, Muhammad Mahdi & Ghasemi Doudkanlou, Mohammad & Dolatabadi, Ali, 2022. "Forecast of Bayesian-based dynamic connectedness between oil market and Islamic stock indices of Islamic oil-exporting countries: Application of the cascade-forward backpropagation network," Resources Policy, Elsevier, vol. 77(C).

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