An Assessment of Return Spillover Among Selected Stock Markets in SAARC Countries

This paper aims to examine the return spillover among the selective stock markets in South Asian Association for Regional Cooperation (SAARC) region, namely, Chittagong Stock Exchange of Bangladesh, Bombay Stock Exchange of India, Karachi Stock Exchange of Pakistan and Colombo Stock Exchange of Sri Lanka. Daily closing prices of selective indices of four countries were taken for a period of January 2005 to December 2014. The stationarity of the data was tested by using Augmented Dickey-Fuller unit ischolar_main and Phillips-Perron unit ischolar_main test simultaneously. Ordinary Least Square (OLS) is applied as all the return series are stationary. The contemporaneous and lag effects of other stock markets’ return on CSE are also tested. This study concluded that there were neither lag effects nor contemporaneous effects on each of the market indices so it may be concluded that there is no return spillover across these four stock markets. The Chittagong stock market is integrated with other SAARC bound markets neither individually nor collectively.