Analyzing Indian Stock Market Index Volatility at the Outbreak of Corona Virus: Can Exchange Rate be a Determinant in Measuring It?

Authors

  • Piyali Roy Chowdhury , Needhi Tiwari

Abstract

The performance of the current world economy with its background of Corona outbreak has been
identified as one of the crucial topics during last six months. In this respect, the study intends to find Indian
stock market volatility considering healthcare index from January 2010 to February 2020. Using daily data,
the analysis employs Exponential Generalized Auto Regressive Conditional Heteroskedasticity (E-GARCH)
model for exploring fluctuations in market as the index series project asymmetric effect here. Also, the
impact of two important exchange rates- Rupee Pound and Rupee Yen on market volatility have been
considered at the same time. The results indicate that the past volatility and its extent of influence on future
volatility (GARCH effect) is positive and significant. Also, the magnitude of the shock that shows impact on
volatility in return of the stock market (ARCH effect) is positive and significant. The leverage effect is
negative explaining adverse shock influences Indian healthcare investment market. Although, in the study,
the data on forecasting shows stability in the variance of investment market despite the initiation of Corona
outbreak news in China. In this respect, the study suggests heavy volume domestic as well as foreign
investment into Indian financial market to diversify world portfolio investment risk

Published

2020-04-30

Issue

Section

Articles