Impact of Innovations in Indian and U.S. Stock Markets on Frontier Markets of Africa, Middle East and South Asia

This paper examines the probable impact of volatility in stock markets of India and US on frontier markets of Africa, Middle East, and South Asia. Time series data for 10 years spanning from March 1, 2009, to February 28, 2018 is considered for the study. Unconditional correlations are computed between returns of respective markets and appropriate regression models are used for ascertaining the impact of returns and volatility in Indian and US stock markets on returns of frontier markets. The results of unconditional correlations reveal that there is positive relationship between Indian VIX and US returns. Also, the returns of frontier stock markets are found to have high degree of correlation with Indian stock market returns. Results of regression indicates that U.S. equity market volatility did have a positively significant impact on Indian, Abu Dhabi and, Saudi Arabian equity market, but not on other frontier market returns