DefinePK

Abstract

<jats:p>The study explores the dynamics of volatility spillover from U.S. political uncertainties to the emerging economies of South Asia by using the Markov-Switching and a DCC-GARCH model. By using the daily data from 2000 to 2024, the study has found that the U.S. political risk has significantly affected the majority of the South Asian stock markets during the first regime. On the other hand, it has affected the stock markets of Bangladesh and Maldives during the second regime. Moreover, the transition probabilities also show a higher likelihood of remaining in the second regime of high volatility along with longer expected durations. Then, the DCC-GARCH model confirms the dependence of these markets' returns on their lagged squared residuals. Overall, the volatility spillover from the U.S. political uncertainties exists in the short run to Indian, Bangladeshi, and Maldivian stock markets, while this spillover exists in the long run for all the stock markets.</jats:p>