Volatility analysis and volatility spillover across equity markets between India and Europe

Abstract

This paper is a comparative study of volatility spillover effects in India and European indices. The analysis used various GARCH models, in order to measure conditional volatility (GARCH), asymmetric effect in the conditional volatility (T-GARCH), volatility persistence in conditional volatility (E-GARCH), impact of conditional volatility on conditional returns (M-GARCH) and volatility spillover (GARCH (1, 1), with exogenous variable, for the period 2005 to 2018. The major results, regarding volatility spillover, revealed that Indian stock market had exercised strong impact on selected European indices. Volatility spillover was found to be from Indian stock market to European indices and vice-versa. According to the T-GARCH model, there was significant asymmetric effect on the conditional volatility. The results of E-GARCH model established volatility persistence in conditional volatility.