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MODELLING THE CONDITIONAL CO-MOVEMENTS OF PAKISTAN AND INTERNATIONAL STOCK MARKETS
Corresponding Author(s) : Ali Akbar Pirzado
Humanities & Social Sciences Reviews,
Vol. 9 No. 3 (2021): May
Purpose of the study: This study assesses and evaluates the conditional co-movements and dynamic conditional correlation of the Pakistan Stock Exchange (PSX) with other Stock Market.
Methodology: DCC-GARCH model has been applied due to its feasibility to model the covariance as a function of correlation and variance together.
Main findings: The findings of the research suggest that the Pakistani Stock Exchange (PSX) is highly volatile compared to two other selected stock markets. In-sample fitting, the study has selected the DCC-GARCH (1, 1) model based on information criterion, conversely, the criterion used for out-of-sample forecast evaluation such as MSFE, RMSFE, MAPE, selected the DCC (2,1)-GARCH (1,1).
Application of the study: This study is very useful for the Pakistan stock market and other international selected stocks markets until and unless the government of Pakistan and other governments will devise new policies which may open new opportunities to investors.
Novelty/ Originality of the study: This study has a great potential in the Pakistani stock market to offer investors to several foreign and domestic investors, allowing them to hold Pakistan as well as foreign and local stocks all major benefits.
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