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This research studies the spillover impact of returns and volatility from leading international stock markets to India. It considers the daily closing values of global and Indian stock indices from April 2003 to March 2023 to investigate the information spillover and potential asymmetric volatility in the Indian markets. The ARCH effect in the residuals was confirmed post-ADF analysis. The spillover effect was tested by applying GARCH and EGARCH models, and the residuals were tested for the model’s robustness. The research exposed that the major global stock market indices could transmit volatility in BSE Sensex. The coefficients of both ARCH and GARCH components exhibited statistical significance, and the shocks persisted for a longer period. The leverage effect was negative for Sensex and Nifty, signifying that lower returns result in a higher volatile market. This study aids investors in making investment decisions by modeling the spillover impact from developed markets and analyzing the asymmetric response of the Indian market to bad news.

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Volatility Spillover and Leverage Effect in Indian Stock Market: A Time Series Investigation

  • 会议论文

  • 发表日期：

    2025年

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  • S. Sathyanarayana,
  • T. Mohanasundaram,
  • S. C. Vetrivel

摘要

This research studies the spillover impact of returns and volatility from leading international stock markets to India. It considers the daily closing values of global and Indian stock indices from April 2003 to March 2023 to investigate the information spillover and potential asymmetric volatility in the Indian markets. The ARCH effect in the residuals was confirmed post-ADF analysis. The spillover effect was tested by applying GARCH and EGARCH models, and the residuals were tested for the model’s robustness. The research exposed that the major global stock market indices could transmit volatility in BSE Sensex. The coefficients of both ARCH and GARCH components exhibited statistical significance, and the shocks persisted for a longer period. The leverage effect was negative for Sensex and Nifty, signifying that lower returns result in a higher volatile market. This study aids investors in making investment decisions by modeling the spillover impact from developed markets and analyzing the asymmetric response of the Indian market to bad news.