Affiliation:
1. School of Commerce and Management, Central University of Rajasthan, Ajmer, Rajasthan, India.
Abstract
The purpose of this article is to examine the dynamic relationship between the Indian stock market and the selected Asian and US stock markets during the post-crisis period. This article uses univariate GARCH (Generalized Autoregressive Conditional Heteroskedasticity) family models on daily observations from March 2009 to December 2015 to evaluate the volatility persistence and leverage effect on Asian developed (Japan, Singapore and Hong Kong) and emerging markets (India, China, Indonesia, Korea, Malaysia and Taiwan) along with the US stock market. AR (Autoregressive) ( 1 )-GARCH (1, 1)-ADCC (Asymmetric DCC) model is employed to find out the dynamic correlation between the Indian equity market and other selected stock markets. The results of the present study give evidence of the leverage effect in conditional volatility but not in conditional correlation, which implies that the rise in conditional volatility is more due to negative shocks than positive ones. On the other hand, dynamic conditional correlation (DCC) does not support any asymmetric effect for the time-varying correlation. The result of average conditional correlation shows the existence of higher diversification opportunities for Indian investors in Malaysian, Chinese and Japanese stock markets (having lower conditional correlation) than in Hong Kong, Indonesian and South Korean markets. The DCC fluctuates more in the cases of India with Singapore, Hong Kong and Indonesia over the sample period. It indicates that the stability of DCC is less reliable and the coefficient of correlation may not be used as a guide for portfolio decisions. But the cases of India with the USA, Japan and China show more stable conditional correlation coefficients. This article investigates the volatility persistence and time-varying relationship among Asian stock markets during the recent period, 2009–2015. The results of this article may be helpful in international portfolio planning and will contribute towards the literature on asymmetric time-varying relationships among Asian markets.
Subject
Business and International Management
Cited by
4 articles.
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