This paper delves into the study of asymmetric volatility behavior in the Nepalese stock market, examining the spillover effects from the US and Indian equity markets. To accomplish this, we employ a generalized autoregressive conditional heteroscedasticity framework to model the asymmetric volatility, utilizing comprehensive data from the Nepal stock market index.
The results of our analysis reveal a distinct pattern of asymmetry, setting it apart from other international equity markets. Specifically, positive shocks contribute to a greater increase in volatility compared to negative shocks. Furthermore, our findings indicate that uninformed investors hold a significant influence within the Nepalese stock market.
Examining the spillover effects, we observe a negative impact from the Indian stock market on the Nepalese stock market. Overall, our conclusions highlight the presence of a “fear of missing out” (FOMO) among noise traders, as well as the existence of pump and dump schemes as inherent characteristics of the Nepalese stock market.
The insights gained from this study hold considerable value for policy makers and investors alike, providing them with valuable information for decision-making purposes.
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