Measuring Volatility Spillover And Connectedness of the Global Markets With a Focus on India

ABSTRACT

Being able to understand the interconnectedness of the global markets can be of great help to global investors and portfolio managers. Identifying the direction of the shock propagations can be critical in managing the risk of a portfolio. In this research, we discuss a framework to study the connectedness of some selected international markets and study the impact of the COVID-19 pandemic on this interconnectedness. We compute the h-step ahead generalized forecast error variance using a vector auto-regression (VAR) model with order p to study the volatility spillover and connectedness of the nations. Further, we use network topology to represent the net pairwise directional connectedness and use it to study the direction of volatility spillover. © 2022 IEEE.