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Modelling volatility in emerging capital market: The case of Indian capital market

Publisher : Academy of Accounting and Financial Studies Journal

School : School of Engineering

Year : 2018

Abstract : pThis paper investigates the presence and pattern of the volatility clustering in the Nifty index return series using GARCH family of models. In addition, this study examines GARCH family of models with reference to out-of-sample forecast accuracy. Besides, this study evaluates the presence of leverage effect or asymmetric information effect in the Nifty index. Analysis is carried out using the data covering the period from 1st January 1996 to 31st December 2015. The presence of a structural break during the 2008 financial crisis is confirmed by the Chow test. Thus, the study carries out the analysis by dividing the sample period into pre-crisis and post-crisis periods. The result shows that there is volatility clustering and leverage effect during pre- and post-crisis periods. Finally, the forecasting process suggests that GARCH (1,1) model is the most appropriate model for predicting the performance of Nifty index return series. © 2002-2018 Allied Business Academies./p

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