Time Varying Volatility in the Indian Stock Market

 Business Perspectives, 16(1), 21-38

22 Pages Posted: 4 Jun 2017

See all articles by Gurmeet Singh

Gurmeet Singh

Unitedworld School of Business, Karnavati University; Karnavati University

Date Written: 2017

Abstract

This paper investigates the volatility dynamics of stock market in India by using daily data of the NIFTY index of NSE from Jan 2000 to Dec 2014. The volatility in the Indian stock market exhibits characteristics similar to those found earlier in many of the major developed and emerging stock markets. Various volatility estimators and diagnostic tests indicate volatility clustering, i.e., shocks to the volatility process persist and the response to news arrival is asymmetrical, meaning that the impact of good and bad news is not the same. It is shown that ARCH family models outperform the conventional OLS models. We find that, the TARCH model is better fit, when we compare the GARCH, EGARCH and TARCH models, on the basis of AIC and SC criteria. Moreover, in the GARCH model, ARCH and GARCH effects remain significant, which highlights the inefficiency in the market. In addition, EGARCH and TARCH models indicate the presence of leverage effect and positive impact of volatility on returns.

Keywords: NIFTY, GARCH, EGARCH, TARCH, Causality Test

JEL Classification: C32, G14

Suggested Citation

Singh, Gurmeet, Time Varying Volatility in the Indian Stock Market (2017).  Business Perspectives, 16(1), 21-38, Available at SSRN: https://ssrn.com/abstract=2979115

Gurmeet Singh (Contact Author)

Unitedworld School of Business, Karnavati University ( email )

907/A, Uvarsad-Vavol Road,
Uvarsad,
Gandhinagar, 382422
India

HOME PAGE: http://https://karnavatiuniversity.edu.in/

Karnavati University ( email )

907/A, Uvarsad
Uvarsad Road
Gandhinagar
India

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
86
Abstract Views
631
Rank
525,567
PlumX Metrics