DCC GARCH Evaluation of Volatility Spillovers in Sovereign Bond Markets for Portfolio Optimisation

Gargi Chola; Pankaj Kumar Gupta

doi:10.48001/jbmis.1102006

Authors

Gargi Chola Research Scholar, Department of Management Studies, Jamia Millia Islamia, New Delhi https://orcid.org/0009-0003-2873-1307
Pankaj Kumar Gupta Professor, Department of Management Studies, Jamia Millia Islamia, New Delhi https://orcid.org/0000-0002-6490-8523

DOI:

https://doi.org/10.48001/jbmis.1102006

Keywords:

garch, volatility, portfolio, bond market

Abstract

The main purpose of this paper is to examine the bond market volatility connectedness between BRICS (Brazil, Russia, India, China and South Africa) and five advanced market i.e. US, France, Italy, Germany and Japan, covering the period 2007-2023 (daily data), including covid-19 Pandemic. We find the persistence of volatility among the variable during crises. However, none of the bond indices of the developed market show a high magnitude of spillover to BRICS, denoting low integration between these countries during these crises. Russia and South Africa are the strongest transmitters of shocks to all other variables in BRICS. Overall it is being observed that the sovereign yield of India, China, and Brazil does not fluctuate much with U.S. and European markets during the crises, making them the most attractive market for risk minimisation and hedging. Therefore, this study suggests that in bond market BRICS have heterogeneous asset structure and can be looked for better bond’s portfolio management.

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