Volatility spillover from institutional equity investments to Indian volatility index

Aggarwal, Vaibhav; Doifode, Adesh; Tiwary, Mrityunjay Kumar

doi:10.1504/ijmcp.2020.111020

Cited by 3 publications

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“…This study examines the time-varying volatility linkages between the three emerging cryptocurrencies by using the BEKK–GARCH model (Engle and Kroner, 1995). BEKK–GARCH model is popularly used to investigate the volatility linkages among different financial time series data (Aggarwal et al , 2020, 2021).…”

Section: Methodsmentioning

confidence: 99%

Optimum investor portfolio allocation in new age digital assets

Aggarwal¹

2021

IJIS

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Purpose Bitcoin and Ethereum, although the most prominent cryptocurrencies, carry a high ticker price. Many investors carry an inherent bias against high price ticker securities and prefer only low prices securities. This paper aims to help market players generate adequate risk-adjusted returns by investing in only lower-priced cryptocurrencies. Design/methodology/approach The pairwise bivariate BEKK-GARCH (1,1) model is deployed to capture the short- and long-term volatility linkages between Litecoin, Stellar and Ripple from August 2015 to June 2020. Findings Litecoin is the most influential volatility sender in the basket of these three cryptocurrencies. The portfolio weights indicate that investors can create an optimized two asset portfolio with the lowest exposure to Stellar with Litecoin and Ripple. Market players with a long position in Ripple can have the cheapest hedge by shorting Stellar. Originality/value This study adds to the scant literature on the association between emerging cryptocurrencies and finding optimum portfolio weight and hedge ratios.

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Section: Methodsmentioning

confidence: 99%

Optimum investor portfolio allocation in new age digital assets

Aggarwal¹

2021

IJIS

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“…In addition to this, it is found that the financial and economic time series usually have time-varying volatility that must be modelled exclusively (Bollerslev, 1986;Bollerslev et al, 1992;Engle, 1982); and hence, ARCH and GARCH family of models are used to estimate volatility of such time series. Literature is also replete with the instances of the use of the GARCH family of models to estimate volatility in such time series (Aggarwal et al, 2020(Aggarwal et al, , 2021aKarmakar, 2005;Rastogi, 2011Rastogi, , 2014Rastogi and Srivastava, 2011). Nevertheless, over the period, it is also witnessed that to model the co-movement of the time series, the cointegration can be used (Rastogi, 2013;Engle and Granger, 1987;Johansen, 1991).…”

Section: Methodsmentioning

confidence: 99%

Volatility integration of gold and crude oil prices with the interest rates in India

Rastogi

Doifode²,

Kanoujiya

et al. 2021

SAJBS

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PurposeCrude oil, gold and interest rates are some of the key indicators of the health of domestic as well as global economy. The purpose of the study is to find the shock volatility and price volatility effects of gold and crude oil market on interest rates in India.Design/methodology/approachThis study finds the mutual and directional association of the volatility of gold, crude oil and interest rates in India. The bi-variate GARCH models (Diagonal VEC GARCH and BEKK GARCH) are applied on the sample data of gold price, crude oil price and yield (interest rate) gathered from November 30, 2015 to November 16, 2020 (weekly basis) to investigate the volatility association including the volatility spillover effect in the three markets.FindingsThe main findings of the study focus on having a long-term conditional correlation between gold and interest rates, but there is no evidence of volatility spillover from gold and crude oil on the interest rates. The findings of the study are of great importance especially to the policymakers, as they state that the fluctuations in prices of gold and crude oil do not adversely impact the interest rates in India. Therefore, the fluctuations in prices of gold and crude may generally impact the economy, but it has nothing to do with interest rate in particular. This implies that domestic and foreign investments in the country will not be affected by gold and crude oil that are largely driven by interest rates in the country.Practical implicationsGold and crude oil are two very important commodities that have their importance not only for domestic affairs but also for international business. They veritably influence the economy including forex exchange for any nation. In addition to this, the researchers believe the findings will provide insights to policymakers, stakeholders and investors.Originality/valueGold and crude oil undoubtedly influence the exchange rates but their impact on the interest rates in an economy is not definite and remains ambiguous owing to the mixed findings of the studies. The lack of studies related to the impact of gold and crude oil on the interest rates, despite them being essentials for the health of any economy is the main motivation of this study. This study is novel as it investigates the volatility impact of crude oil and gold on interest rates and contributes to the existing literature with its findings.

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“…A strand of extant literature examined focused on implied stock market volatility instead of historical volatility. The implied volatility index (VIX) was found to be significantly influenced by the value of FII net equity flows (Aggarwal et al, 2020). In a study on 19 equity indices, VIX index was found to be a more robust indicator for modelling stock market volatility compared to Economic Policy Uncertainty Index (EPU) (Wang et al, 2020).…”

Section: Review Of Literaturementioning

confidence: 99%

Do Lower Foreign Flows and Higher Domestic Flows Reduce Indian Equity Market Volatility?

Aggarwal

Doifode²,

Tiwary

2021

Vision: The Journal of Business Perspective

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This study examines the relationship that both domestic and foreign institutional net equity flows have with the India stock markets. The motivation behind is the study to examine whether increased net equity investments from domestic institutional investors has reduced the influence of foreign equity flows on the Indian stock market volatility. Our results indicate that only during periods in which domestic equity inflows surpass foreign flows by a significant margin, as seen during 2015–2018, is the Indian stock market volatility not significantly influenced by foreign equity investments. However, during periods of re-emergence of strong foreign net inflows, the Indian market volatility is still being impacted significantly, as has been observed since 2019. Furthermore, we find that both large-scale net buying and net selling by domestic funds increased the stock market volatility as observed during 2015–2018 and COVID-impacted year 2020 respectively. The implications of this study are multi-fold. First, the regulators should discuss with industry bodies before enforcing major structural changes like reconstituting of mutual fund investment mandate in 2017 which forced domestic funds to quickly change portfolio allocation amongst large-cap, mid-cap and small-cap stocks resulting in higher stock market volatility. Second, adequate investor educational and awareness programmes need to be conducted regularly for retail investors to minimize herd behaviour of investing during market rise and heavy redemptions at times of fall. Third, the economic policies should be stable and forward-looking to ensure foreign investors remain attracted to the Indian stock markets at all times.

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Volatility spillover from institutional equity investments to Indian volatility index

Cited by 3 publications

References 0 publications

Optimum investor portfolio allocation in new age digital assets

Optimum investor portfolio allocation in new age digital assets

Volatility integration of gold and crude oil prices with the interest rates in India

Do Lower Foreign Flows and Higher Domestic Flows Reduce Indian Equity Market Volatility?

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