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Analyzing the COVID-19 Pandemic Volatility Spillover Influence on the Collaboration of Foreign and Indian Stock Markets

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  • Runumi Das
  • Arabinda Debnath

Abstract

This article assesses the impact of COVID-19 on stock market volatility spillover in India using equity (NSE exchange) and bond (Foreign Exchange) indices. The article utilized the TGARCH model (1,1) to evaluate the volatility of the NSE stock exchange and sectoral indices. Furthermore, the study aimed to compare stock price returns in pre- and post-COVID-19 scenarios to global indices, such as NASDAQ, Nikkei 225, and FTSE100. Subsequently, it utilised stock exchange and bond indices to explore the volatility spillover influence using vector autoregressive-Baba, Engle, Kraft, and Kroner with multivariate GARCH (VAR-BEKKGARCH model). The findings of the variable showed a negative and statistically significant correlation that suggests that the COVID-19 outbreak lowered stock market volatility in India. In terms of historical errors, the coefficients represent the persistence of volatility for each nation. NIFTY and ASDAQ have the largest and longest-term spillover effect. According to the findings, India is the least sensitive country to external shocks.

Suggested Citation

  • Runumi Das & Arabinda Debnath, 2022. "Analyzing the COVID-19 Pandemic Volatility Spillover Influence on the Collaboration of Foreign and Indian Stock Markets," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 14(2), pages 411-452, June.
    • Handle: RePEc:col:000443:020558
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    More about this item

    Keywords

    stock; stock indices; foreign exchange; volatility; volatility spillover; NSE; TGARCH; VAR-BEKK-GARCH.;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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