International Journal of Management Research and Emerging Sciences Volume 7 Issue 1 (2017) PP. 01-28 ANALYSIS OF VOLATILITY SPILLOVER OF PORTFOLIO RETURNS: EVIDENCE FROM PAKISTANI STOCK MARKET Dr. Fauzia Mubarik 1 , Dr. Attiya Yasmin Javid 2 Abstract The present study attempts to model and analyze the lagged asymmetric volatility spillover effect between the high/low beta portfolio returns and the economic variables returns in case of Pakistan for the time period of July 2001 to June 2015 respectively. The lagged effect is taken to analyze and model the previous effect of the volatility spillover of the portfolio returns and the economic variables on the current volatility spillover of the respective variables respectively. The study also attempts to study the leverage effect (asymmetry) of the respective variables by employing the EGARCH model respectively. The findings of the present study indicate the significant differing volatility spillover effect of high beta portfolio returns and the low beta portfolio returns with all of the four economic variable returns respectively. Keywords: Volatility Spillover, High/Low Beta Portfolio Returns, Economic Variables Returns, EGARCH Model. 1. Introduction Since two decades, the developing trends of the foreign investors to trade and invest in the emerging economies have also gained prominence amongst the macro-economists and the financial policy makers to analyze the interdependent co-movements of the economic factors and the stock markets respectively. Intrigued by this concept of interdependent co-movements, the researchers have tried to empirically investigate and analyze the interdependent co-movements also called as the volatility spillover effect of the financial markets across the globe (Theodossiou and Lee, 1993; Donnell and Morales, 2009), volatility spillover effect of assets within a portfolio (Morales, 2008) and the volatility spillover effect within the portfolios (Miyakoshi, 2003) respectively. With respect to Pakistan’s capital market, it has shown a tremendous growth since two decades because of its conducive approach towards the economic and the investment policies. Some of the key factors that have positively contributed to the growth of the Pakistani stock market are 1 Assistant Professor, National University of Modern Languages, Islamabad, Pakistan, Email: fmubarik@numl.edu.pk 2 Professor, Pakistan Institute of Development Economics, Islamabad, Pakistan, E-mail: attiyajavid@pide.org.pk