Abstract
This study examines the relationship between banking concentration and financial market volatility in India. A challenge in analyzing this relationship is the differing frequencies of the data. Banking concentration data tends to be available quarterly compared to the high-frequency nature of volatility data of financial market. To address this issue, a GARCH–MIDAS model is employed, which is capable of effectively relating data with dissimilar frequencies. We quantify bank concentration using the n-bank concentration ratio and the Herfindahl–Hirschman Index. The analysis reveals a positive association between higher banking concentration and increased volatility in the Indian equity and bond markets.
Published Version
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