Abstract
This paper is an attempt to understand how far the volatility in the world stock market has penetrated Indian stock market and the nature of volatility of stock indices at the sectoral level during a period covering the subprime crisis. Most of the previous studies on sectoral returns are related to diversification and optimum portfolio management. But it is also important to understand the characteristics of the volatility of the individual sectoral returns as well as their relationship with market returns. This paper empirically investigates the pattern of volatility at the sectoral level in the Indian stock market during April 1, 2006, to March 31, 2011, and any ‘spillover effect’ between the domestic sectors and the US stock markets, which gives us an idea about how deep the penetration of the subprime crisis was in the Indian stock market and how persistent was its effect. The study focuses on the time-varying nature of volatility and the presence of characteristics like volatility clustering. The disaggregated study gives us an idea of how far the different segments of stock markets are integrated with the international stock markets. It also addresses the issue of leverage effect for all the indices to check whether a negative shock is creating more volatility than positive shocks. It also gives us the opportunity to compare the level of persistence among pre-crisis, crisis and post-crisis period.
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Notes
- 1.
The first/second position is held by countries like Mauritius and Luxemburg where the portfolio investment is driven by tax considerations.
- 2.
Results are available with the authors.
- 3.
Bhatt and Panigrahi (2014).
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Sarkar, A., Roy, M. (2019). A Study of Volatility of Five Major Stock Indices of Indian Stock Market. In: Bandyopadhyay, S., Dutta, M. (eds) Opportunities and Challenges in Development. Springer, Singapore. https://doi.org/10.1007/978-981-13-9981-7_5
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