Summary of - Volatility Spillover Among the Sectoral Indices of the Indian Capital Market: Evidence from the COVID Period

Document Type

Article

Abstract

Background: The transfer of sectoral indices information is an intriguing research subject. The research on this topic potentially provided valuable insights into the dynamics of sectors of the Indian capital market during the COVID-19 period.

Research Goals:

The primary goal of this study is to examine the volatility spillover relationship among sectoral indices during the COVID period. Second, the research aimed to capture the influence of negative news on the volatility of sectoral indices.

Methodology: The study employed the asymmetric dynamic conditional correlation (ADCC) model to measure volatility spillover among the sectoral indices with asymmetric effects to assess the impact of bad news. The study further calculated the time-varying conditional correlation.

Results: Our findings indicate a volatility spillover among the sectoral indices during the COVID period. The return spillover shows that the IT index negatively and significantly impacts the current movements of the Oil & Gas, Financial Services, FMCG, Bank, and Auto indices. Further, the empirical analysis indicated short-run and long-run volatility persistence among sectoral indices of the Indian capital market. The results also showed the significant effect of bad news on the volatility of the sectoral indices. The time-varying conditional correlation suggested a high correlation among the sectoral indices during COVID-19. So, there was only a limited opportunity for portfolio diversification among these sectors during the crisis period. The findings may assist financial advisors in assessing the relationship among sectors of the Indian capital market during the crisis period. While constructing the equity investment portfolio during the crisis period, financial managers must wait for the market to stabilize before determining whether sector diversification is appropriate or required.

Publication Date:

September 2023

Recommended Citation:

Sahoo, S., & Kumar, S. (2023). Volatility spillover among the sectoral indices of the Indian capital market: Evidence from the COVID Period. Indian Journal of Finance, 17(9), 41-57.

Publication Date

2023

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