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COVID-19 Pandemic and Indices Volatility: Evidence from GARCH Models

Author

Listed:
  • Rajesh Mamilla

    (VIT Business School, Vellore Institute of Technology, Vellore 632014, India)

  • Chinnadurai Kathiravan

    (VIT Business School, Vellore Institute of Technology, Vellore 632014, India)

  • Aidin Salamzadeh

    (College of Management, University of Tehran, Tehran 141556311, Iran)

  • Léo-Paul Dana

    (ICD Business School, 75010 Paris, France
    LUT School of Business and Management, Lappeenranta University of Technology, 53850 Lappeenranta, Finland)

  • Mohamed Elheddad

    (Teesside University International Business School, Teesside University, Middlesbrough TS1 3BX, UK)

Abstract

This study examines the impact of volatility on the returns of nine National Stock Exchange (NSE) indices before, during, and after the COVID-19 pandemic. The study employed generalized autoregressive conditional heteroskedasticity (GARCH) modelling to analyse investor risk and the impact of volatility on returns. The study makes several contributions to the existing literature. First, it uses advanced volatility forecasting models, such as ARCH and GARCH, to improve volatility estimates and anticipate future volatility. Second, it enhances the analysis of index return volatility. The study found that the COVID-19 period outperformed the pre-COVID-19 and overall periods. Since the Nifty Realty Index is the most volatile, Nifty Bank, Metal, and Information Technology (IT) investors reaped greater returns during COVID-19 than before. The study provides a comprehensive review of the volatility and risk of nine NSE indices. Volatility forecasting techniques can help investors to understand index volatility and mitigate risk while navigating these dynamic indices.

Suggested Citation

  • Rajesh Mamilla & Chinnadurai Kathiravan & Aidin Salamzadeh & Léo-Paul Dana & Mohamed Elheddad, 2023. "COVID-19 Pandemic and Indices Volatility: Evidence from GARCH Models," JRFM, MDPI, vol. 16(10), pages 1-14, October.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:10:p:447-:d:1261155
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    References listed on IDEAS

    as
    1. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    2. JEBABLI, Ikram & KOUAISSAH, Noureddine & AROURI, Mohamed, 2022. "Volatility Spillovers between Stock and Energy Markets during Crises: A Comparative Assessment between the 2008 Global Financial Crisis and the Covid-19 Pandemic Crisis," Finance Research Letters, Elsevier, vol. 46(PA).
    3. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
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