Measuring Risk and Leverage Patterns of Indian and Chinese Stock Markets: Evidence from Pre and Post Global Financial Crisis

Abstract

To understand the nature of stock markets is important in investment opportunities. The study focusses on the risk and leverage pattern of stock markets taking India and China as a sample by using daily data of CNX Nifty and Shanghai from 1992 to 2015. By accounting the structural break of GFC (Global Financial Crisis), the data was split in two parts, i.e., pre and post global financial crisis. The study applied GARCH family models to capture the results indicating highly significant ARCH and GARCH parameters for both Indian and Chinese markets for pre and post-crisis period and there was also an evidence of GARCH in Mean model effect in Shanghai market during the Pre-crisis period. The results of the asymmetric model shows that good news creates less volatility than bad news for all the periods except for Shanghai Composite Index in post-crisis which shows negative and insignificant effect.