Volatility has been important phenomena in aspect of study of stock markets. Traders, investors and policy makers are quite interested in analyzing the return and volatility behavior of local as well as global markets. Different stock markets have different risk to reward ratio, in different era of time. The return and volatility spillover effect is very important in analyzing the sentiment of stock markets. The study shows that different stock markets have different risk to reward ratio i.e. the economic rule of high risk is parallel to high profit, is not as such in practice in practical world, especially stock market. The reason is that there are other economic factors and future expectation of economic condition and sentiment that determine the volatility and return in current market environment. In other words a well discounted future market information is reflected in present sentiment of stock market, and this could be analyses in aspect of market efficient theory. The information in efficient market resulted in equipoise prices and the arbitrage is avail in the very next moment in efficient market. According to economic proposition, high return should be parallel to high volatility and low return to low volatility. The study shows that in stock market high volatility regime would be parallel to low return and low volatility regime may be parallel to high return. Second, the spillover effect of return and volatility depends on different local as well as global actors. The high volatility and return regime may not only change by global economic environment, but it may also change due to local political and economic changes. So, in this case high global volatility or return regime does not have spillover affect over local market, and sometimes local market and global markets could behave differently. The three under studying stock markets have different volatility spillover effect over each market, under the Markov Regime Switching Model. The study show that there exist volatility spillover effect but local political, economic and institutional factors also play major role to determine the magnitude of the volatility spillover among the stock markets. Supervisor:- Dr. Muhammad Jamil