Indian Stock Market Volatility using GARCH Models: A Case Study of NSE

Bora, Bedanta; Adhikary, Anindita

doi:10.26573/2021.15.1.4

Cited by 2 publications

(1 citation statement)

References 14 publications

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“…The coefficient has a likely indication both in EGARCH (negative, significant) and TGARCH (positive, significant) models. EGARCH (1, 1) model fits better to capture the asymmetric volatility [64]. Another study by Sathyanarayana et al, [65] tried to explore the impact of a spillover effect from commodity (crude prices) on the stock market and found a significant impact of commodity spillover on the stock market.…”

Section: Literature Reviewmentioning

confidence: 99%

Examining the Spillover Effects from Global Stock Markets to Indian Stock Market

Sathyanarayana¹,

Pushpa²,

Gargesa³

2023

AJEBA

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Purpose: The study aims to examine the transmission of spillover effects from global stock markets to the Indian stock market. The chosen global markets are CAC-40, DJIA, FTSE 100, SMI, KOSPI, DAX, HANG SENG, and NIKKEI with respect to S&P BSE SENSEX. Design/Methodology/Approach: The study uses secondary data. The study period is from 1st January 2000 to 4th June 2021. The required data for the study has been collected from the Thomson Reuters database. Later the collected data has been tested for stationarity by running the ADF test. Since we found an arch effect in the collected time series data, we ran the GARCH model to investigate the spillover effect from developed stock markets to the Indian stock market by running all the three suggested models such as Normal Gaussian Distribution, Student t Distribution, and GED with fixed parameter. To capture the leverage effect, the researchers have run the EGARCH model to capture spillover asymmetry in the Indian stock market. Findings: The ARCH, GARCH, and EGARCH revealed that there was a significant information spillover effect from CAC-40, FTSE 100, SMI, KOSPI, HANG SENG, and NIKKEI on S&P BSE SENSEX. DJIA and DAX were not capable of spreading the spillover effect on BSE SENSEX. The EGARCH revealed that negative shocks in the foreign market created a significant spillover effect in the Indian stock market. Originality and Value: This study’s empirical analysis would help market participants in understanding the forecasted volatility of Sensex returns and can take this sign as an advantage to converting their holdings into returns. The market participants can also make a decision as to whether they can invest in the Indian stock market and diversify their portfolios.

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Section: Literature Reviewmentioning

confidence: 99%