Indian Journal of Finance

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Volatility Spillovers across Developed/Developing Markets: The Case of India


Affiliations
1 W. E. Nelson Professor of Financial Economics, University of Portland, 5000 N. Willamette Blvd., Portland, Oregon 97203, United States
2 Schulte Professor of Finance, University of Portland, 5000 N. Willamette Blvd., Portland, Oregon, 97203, United States
3 Foundation Professor of Economics, College of Business, University of Nevada, Reno, Nevada 89557, United States
4 Senior Analyst, Fractal Analytics, Level 7 Silver Metropolis, Off Western Express Highway, Goregaon (E), Mumbai - 400 063, India

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The present research paper investigates the daily volatility spillovers between Standard and Poor's 500, Nikkei, and India's Nifty index between the time period from 2000 - 2009. We find that the price series exhibit nonlinear dependencies, inconsistent with chaotic structure. Bivariate GARCH estimations with volume controls indicate multi-directional spillovers. Finding evidence of asymmetric market responses to shocks, we propose and estimate asymmetric bivariate EGARCH models. We find transmissions to be asymmetric whereby positive and negative shocks have an unequal impact on the volatility of the other market. While the relationship between the developed markets is strong, the influence of the less developed Indian market is also apparent.

Keywords

Volatility, Bivariate GARCH, Chaos, Nonlinearities

G00, G14, G15

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  • Volatility Spillovers across Developed/Developing Markets: The Case of India

Abstract Views: 131  |  PDF Views: 0

Authors

Bahram Adrangi
W. E. Nelson Professor of Financial Economics, University of Portland, 5000 N. Willamette Blvd., Portland, Oregon 97203, United States
Arjun Chatrath
Schulte Professor of Finance, University of Portland, 5000 N. Willamette Blvd., Portland, Oregon, 97203, United States
Kambiz Raffiee
Foundation Professor of Economics, College of Business, University of Nevada, Reno, Nevada 89557, United States
Nitin Sharma
Senior Analyst, Fractal Analytics, Level 7 Silver Metropolis, Off Western Express Highway, Goregaon (E), Mumbai - 400 063, India

Abstract


The present research paper investigates the daily volatility spillovers between Standard and Poor's 500, Nikkei, and India's Nifty index between the time period from 2000 - 2009. We find that the price series exhibit nonlinear dependencies, inconsistent with chaotic structure. Bivariate GARCH estimations with volume controls indicate multi-directional spillovers. Finding evidence of asymmetric market responses to shocks, we propose and estimate asymmetric bivariate EGARCH models. We find transmissions to be asymmetric whereby positive and negative shocks have an unequal impact on the volatility of the other market. While the relationship between the developed markets is strong, the influence of the less developed Indian market is also apparent.

Keywords


Volatility, Bivariate GARCH, Chaos, Nonlinearities

G00, G14, G15