SPILLOVER EFFECT OF MEAN AND VOLATILITY IN ALTERNATIVE INVESTMENTS: STUDY FOR PAKISTANI FUND MANAGERS

The main purpose of the study is to find out the hedging capabilities between alternative assets (Gold, Crude oil, Currencies, MSCI Global, and Mutual Funds) and stock returns of Pakistan Stock Exchange (PSX). ARCH (1,1) and and GARCH (1,1) models are applied to determine the mean and spillover effect between alternative assets returns and PSX index returns. The results of the study reveal that volatility spillover exists in all alternative investments except MSCI Global Index because MSCI indicates insignificant results. Therofre, it is better opportunity for fund managers to invest in MSCI Global or Emerging Index as it will provide more hedging opportunities. Keywords: Alternative Investments, Mean volatility, Volatility Spillover, ARCH (1,1), GARCH (1,1), Gold, MSCI Global Index, Crude oil, Mutual Funds, Dollar , KSE