Abstract
This paper examines the nature of volatility of selected sectoral stock indices traded in the National Stock Exchange. Using the EGARCH model introduced by Nelson, it has been observed that the selected indices are subject to Autoregressive Conditional Heteroskedasticity (ARCH) effects. There are significant leverage effects in the case of five indices. Volatility seems to be highly persistent in the case of all the indices except one. Moreover, four indices are highly sensitive to market events.
Highlights
Savings are generated when a person or an organization abstains from present consumption for a future use
A comparison of various indices show that REALTY, METAL, information technology (IT) and ENERGY are highly sensitive to market events compared to other indices
This paper considered the modeling of the stock returns volatility of selected sectoral indices from the National Stock Exchange, NIFTY
Summary
Savings are generated when a person or an organization abstains from present consumption for a future use. Investors interpret a raise in stock market volatility as an increase in the risk of equity investment and they shift their funds to less risky assets. It has an impact on business investment spending and economic growth through a number of channels. According to Merton Miller, the Nobel laureate, writes “by volatility public seems to mean days when large market movements, down moves, occur These precipitous market wide price drops cannot always be traced to a specific news event. The public takes a more deterministic view of stock prices; if the market crashes, there must be a specific reason.”
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