Modeling Asymmetric Volatility in the Indian Stock Market

Hojatallah Goudarzi, C.S. Ramanarayanan

Abstract


This paper studied the effects of good and bad news on volatility in the Indian stock markets using asymmetric
ARCH models during the global financial crisis of 2008-09. The BSE500 stock index was used as a proxy to the
Indian stock market to study the asymmetric volatility over 10 year’s period. Two commonly used asymmetric
volatility models i.e. EGARCH and TGARCH models were used. The BSE500 returns series found to react to
the good and bad news asymmetrically. The presence of the leverage effect would imply that the negative
innovation (news) has a greater impact on volatility than a positive innovation (news). This stylized fact
indicates that the sign of the innovation has a significant influence on the volatility of returns and the arrival of
bad news in the market would result in the volatility to increase more than good news. Therefore, we conclude
that, bad news in the Indian stock market increases volatility more than good news.

Full Text: PDF DOI: 10.5539/ijbm.v6n3p221


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International Journal of Business and Management   ISSN 1833-3850 (Print)   ISSN 1833-8119 (Online)

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{"cc_re__cc_re__cc_by_3_0": ["ns and the arrival of<br />bad news in the market would result in the volatility to increase more than good news. Therefore, we conclude<br />that, bad news in the Indian stock market increases volatility more than good news.</div>\n\t\t<br />\n\t\t</div>\n\t\n\t\n\t\n\t\t\t\t\n\t\t\tFull Text:\n\t\t\t\t\t\t\t\t\t<a href=\"http://ccsenet.org/journal/index.php/ijbm/article/view/9714/6964\" class=\"file\" target=\"_parent\">PDF</a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span style=\"padding-left:10px;\">DOI:</span> 10.5539/ijbm.v6n3p221\n\t\n\n\n\n<br /><br />\n\t\t<a target=\"_new\" rel=\"license\" href=\"http://creativecommons.org/licenses/by/3.0/\">\n\t\t\t<img alt=\"Creative Commons License\" style=\"border-width:0\" src=\"http://i.creativecommons.org/l/by/3.0/80x15.png\"/>\n\t\t</a>\n\t\t<br/>\n\t\tThis work is licensed under a <a rel=\"license\" target=\"_new\" href=\"http://creativecommons.org/licenses/by/3.0/\">Creative Commons Attribution 3.0  License</a>.\n\n<!-- Google Analytics -->\n<script src=\"http://www.google-analytics.com/urchin.js\" type=\"text/javascript\">\n</script>\n<script type=\"text/javascript\">\n_uacct = \"UA-7035128-1\";\nurchinTracker();\n</script>\n<!--", ">\n\t\n\t\n\t\n\t\t\t\t\n\t\t\tFull Text:\n\t\t\t\t\t\t\t\t\t<a href=\"http://ccsenet.org/journal/index.php/ijbm/article/view/9714/6964\" class=\"file\" target=\"_parent\">PDF</a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span style=\"padding-left:10px;\">DOI:</span> 10.5539/ijbm.v6n3p221\n\t\n\n\n\n<br /><br />\n\t\t<a target=\"_new\" rel=\"license\" href=\"http://creativecommons.org/licenses/by/3.0/\">\n\t\t\t<img alt=\"Creative Commons License\" style=\"border-width:0\" src=\"http://i.creativecommons.org/l/by/3.0/80x15.png\"/>\n\t\t</a>\n\t\t<br/>\n\t\tThis work is licensed under a <a rel=\"license\" target=\"_new\" href=\"http://creativecommons.org/licenses/by/3.0/\">Creative Commons Attribution 3.0  License</a>.\n\n<!-- Google Analytics -->\n<script src=\"http://www.google-analytics.com/urchin.js\" type=\"text/javascript\">\n</script>\n<script type=\"text/javascript\">\n_uacct = \"UA-7035128-1\";\nurchinTracker();\n</script>\n<!-- /Google Analytics -->\n\n<br /><br />\n<p>International Journal of Business and Management\u00a0\u00a0 ISSN 1833-3850 (Print)\u00a0\u00a0 ISSN 1833-8119 (Online)</p><p>Copyright \u00a9 Canadian Center of Science and Education</p><p>To make sure that you can receive mess"], "copyright__copyright__copyright": ["than good news.\n\nFull Text: PDF DOI: 10.5539/ijbm.v6n3p221\n\n\nThis work is licensed under a Creative Commons Attribution 3.0 License.\n\nInternational Journal of Business and Management\u00a0\u00a0 ISSN 1833-3850 (Print)\u00a0\u00a0 ISSN 1833-8119 (Online)\n\nCopyright \u00a9 Canadian Center of Science and Education\n\nTo make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.\n\n\u00a0", "than good news.\n\nFull Text: PDF DOI: 10.5539/ijbm.v6n3p221\n\n\nThis work is licensed under a Creative Commons Attribution 3.0 License.\n\nInternational Journal of Business and Management\u00a0\u00a0 ISSN 1833-3850 (Print)\u00a0\u00a0 ISSN 1833-8119 (Online)\n\nCopyright \u00a9 Canadian Center of Science and Education\n\nTo make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.\n\n\u00a0", "than good news.\n\nFull Text: PDF DOI: 10.5539/ijbm.v6n3p221\n\n\nThis work is licensed under a Creative Commons Attribution 3.0 License.\n\nInternational Journal of Business and Management\u00a0\u00a0 ISSN 1833-3850 (Print)\u00a0\u00a0 ISSN 1833-8119 (Online)\n\nCopyright \u00a9 Canadian Center of Science and Education\n\nTo make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.\n\n\u00a0", "than good news.\n\nFull Text: PDF DOI: 10.5539/ijbm.v6n3p221\n\n\nThis work is licensed under a Creative Commons Attribution 3.0 License.\n\nInternational Journal of Business and Management\u00a0\u00a0 ISSN 1833-3850 (Print)\u00a0\u00a0 ISSN 1833-8119 (Online)\n\nCopyright \u00a9 Canadian Center of Science and Education\n\nTo make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.\n\n\u00a0"]}