Indian Journal of Economics and Development

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Modelling the Volatility of Banking Sectors of National Stock Exchange


Affiliations
1 Guru Jambheswar University of Science and Technology, Hisar, Haryana, India
 

Objective: To model the conditional volatility of banking sectors of National Stock Exchange, India and to capture its dynamics as volatility clustering, persistence and leverage effect.

Methodology: Volatility is analysed by applying EGARCH model on daily returns data of two sectors namely composite Bank sector (Bank) and PSU Bank sector (PSU).

Findings: It is found that both sectors are showing volatility clustering, significant persistence and leverage effect but PSU bank sector is more prone to negative news and its returns are more volatile, composite Bank sector is less prone to negative shocks due to inclusion of private banks. Volatility shocks take time to die out in both sectors. Volatility of both sectors is explosive in nature.

Applications: Finding is helpful in taking decisions regarding investment and reforms in banking to stabilize the volatility.


Keywords

PSU Bank, Bank and EGARCH Model.
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  • Modelling the Volatility of Banking Sectors of National Stock Exchange

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Authors

Shveta Singh
Guru Jambheswar University of Science and Technology, Hisar, Haryana, India
Teena
Guru Jambheswar University of Science and Technology, Hisar, Haryana, India

Abstract


Objective: To model the conditional volatility of banking sectors of National Stock Exchange, India and to capture its dynamics as volatility clustering, persistence and leverage effect.

Methodology: Volatility is analysed by applying EGARCH model on daily returns data of two sectors namely composite Bank sector (Bank) and PSU Bank sector (PSU).

Findings: It is found that both sectors are showing volatility clustering, significant persistence and leverage effect but PSU bank sector is more prone to negative news and its returns are more volatile, composite Bank sector is less prone to negative shocks due to inclusion of private banks. Volatility shocks take time to die out in both sectors. Volatility of both sectors is explosive in nature.

Applications: Finding is helpful in taking decisions regarding investment and reforms in banking to stabilize the volatility.


Keywords


PSU Bank, Bank and EGARCH Model.

References