Volatility Spillover Effect in Indian Stock Market

Authors

  • Surya Bahadur G. C School of Business, Pokhara University
  • Ranjana Kothari Amity University, Gurgaon
  • Rajesh Kumar Thagurathi Faculty of Management, Pokhara University

DOI:

https://doi.org/10.3126/jjis.v5i0.17842

Keywords:

Contagion, Financial integration, Indian stock market, Volatility spillover, Volatility transmission

Abstract

The study aims to empirically examine the transmission of volatility from global stock markets to Indian stock market. The study is based on time series data comprising of daily closing stock market indices from National Stock Exchange (NSE), India and major foreign stock exchange of the three countries one each from America, Europe and Asia making the highest portfolio investment in Indian stock market. The study period covers 11 years from 1st January, 2005 to 31st December, 2015 comprising a total of 2731 observations. The Indian stock index used is CNX Nifty 50 and the foreign indices are S & P 500 from USA, FTSE 100 from UK, and Nikkei 225 from Japan. The results reveal that the Indian stock market return is co-integrated with market returns of US, UK and Japanese stock markets. Therefore, the return and hence volatility of Indian stock market is associated with global markets which depicts that it is getting integrated with global financial markets. The results provide empirical evidence for volatility transmission or volatility spillover in the Indian stock market from global markets. There exists inbound volatility transmission from US market to Indian stock market. The Indian and UK stock market have bi-directional volatility transmission. However, there exists presence of only outbound volatility transmission from Indian stock market to Japanese stock market. The volatility transmission from global markets to India is rapid with the spillover effect existing for up to three days only.

Janapriya Journal of Interdisciplinary Studies, Vol. 5 (December 2016), page: 83-101

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Author Biographies

Surya Bahadur G. C, School of Business, Pokhara University

Assistant Professor

Ranjana Kothari, Amity University, Gurgaon

Assistant Professor

Rajesh Kumar Thagurathi, Faculty of Management, Pokhara University

Associate Professor

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Published

2017-07-21

How to Cite

G. C, S. B., Kothari, R., & Thagurathi, R. K. (2017). Volatility Spillover Effect in Indian Stock Market. Janapriya Journal of Interdisciplinary Studies, 5, 83–101. https://doi.org/10.3126/jjis.v5i0.17842

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Section

Research Articles