Post Economic Crisis Equity Market Analysis: Evidence from Indian, Sri Lankan and Pakistani Stock Index

This study analyzes the volatilities and return series of South Asian equity markets and compared them to the U.S. equity market. GJR-GARCH model with conditional mean is used to estimate the volatility of equity market returns of S&P BSE SENSEX (India), CSE All Share (Sri Lanka), KSE 100(Pakistan) and S&P 500 (U.S.). The sample period is from January 2000 to December 2019 and subperiods of pre-crisis from January 2000 to December 2007 and post-crisis from January 2001 to December 2019. The results show the evidence of persistent autocorrelation effect from Sri Lankan, Pakistani and Indian market in pre-crisis while U.S. market do not show the autocorrelation effect. Sri Lankan and Pakistani market consistently show persistent autocorrelation in post-crisis. The analysis finds the presence of volatility clustering in South Asian markets is weak compared to the U.S. market during pre-crisis, but it became stronger during post-crisis. It also finds that the ARCH effect reduced in post-crisis, while the leverage effect increases from all markets that implies the markets became more sensitive to the bad news and less sensitive to the good news. Indian market appears to behave like the U.S market while Sri Lankan and Pakistani markets are more volatile to the market information in terms of returns and volatilities.