Finding the Persistence of Stock Volatility on the NSE, Nifty Indices
30 Pages Posted: 18 Sep 2020
Date Written: August 6, 2020
This study is conducted to find if there is an existence of volatility persisting in any of the market capitalization indices from NSE NIFTY 500 for the sample period starting from April 2007 to December 2019. The following ARCH family models are tested to find the best model fit and use the most parsimonious model; Bollerslev and Taylor (1986) GARCH, Nelson's (1991) EGARCH and TGARCH. It is found that Smallcap and Midcap stock index is showing persistence in stock volatility with bad news having larger effects on its past residuals. Largecap stock index due to its model that is GARCH, can only find existence of volatility clustering instead it is found that there is evidence of the past errors not affecting the Largecap index. From the result analysis, it can be concluded that there is existence of persistence of volatility and that there is volatility clustering reflected in the present prices of the indices under study.
Keywords: EGARCH; GARCH; TGARCH
JEL Classification: G11, G12, G19
Suggested Citation: Suggested Citation