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Oil Price Volatility and Tail Risk Dynamics in the Indian Stock Market: Insights From the CAViaR and TVP‐VAR Models

Author

Listed:
  • Son Duy Pham
  • Pranjal Srivastava
  • Thao Thac Thanh Nguyen

Abstract

This study examines tail risk transmission across Indian stock sectors, employing the conditional autoregressive value‐at‐risk (CAViaR) model and time‐varying parameter vector autoregression (TVP‐VAR) methodology. We uncover substantial interconnectedness, with total connectedness indices (TCIs) for both negative and positive tail risks reflecting significant inter‐sectoral dependency. Analysis highlights symmetrical tail risk transmission across sectors and identifies consumer discretionary, financial services, and industrials as pivotal in risk distribution. Crude oil volatility is pinpointed as a key factor influencing negative tail risk connectedness, notably during geopolitical upheavals. The results emphasize the constrained potential for sectoral diversification in mitigating systemic risks, advocating for advanced risk management practices and diversified investment portfolios.

Suggested Citation

  • Son Duy Pham & Pranjal Srivastava & Thao Thac Thanh Nguyen, 2025. "Oil Price Volatility and Tail Risk Dynamics in the Indian Stock Market: Insights From the CAViaR and TVP‐VAR Models," International Review of Finance, International Review of Finance Ltd., vol. 25(4), December.
    • Handle: RePEc:bla:irvfin:v:25:y:2025:i:4:n:e70044
    DOI: 10.1111/irfi.70044
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