Modelling Volatility of Size Indices Through Garch and Tgarch Models: Evidence from India
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Autores: Sonal Sharma
- Localización: International Journal of Professional Business Review: Int. J. Prof.Bus. Rev., ISSN 2525-3654, ISSN-e 2525-3654, Vol. 8, Nº. 4, 2023 (Ejemplar dedicado a: Continuous publication; e01852)
- Idioma: inglés
- Enlaces
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Resumen
Purpose: The objective of this study was to select the best model for modelling the volatility of log return series of four size indices taken from the Indian stock markets.
Theoretical framework: Stock markets throughout the world have been designing various kinds of indices depending upon the requirements of the investors. Accordingly, BSE launched some indices, categorized as size indices, depending upon the market capitalization of the stocks listed on their exchange. Such categorization helps the investors in appropriate decision making. Research on these specific indices is scarce and therefore the aim of the present study.
Design/methodology/approach: We analyzed the log return series of four indices, namely S&P BSE Sensex, S&P BSE Large cap index, S&P BSE Mid cap Select index and the S&P BSE Small cap index, by fitting the GARCH (1,1) and the TGARCH (1,1) models for the period from 1 Januray 2018 to 31 December 2022.
Findings: The research on modelling volatility is voluminous with varied results as per the various assets and datasets utilized for the purpose. Present study confirms the results from previous study that to model the volatility of size indices a GARCH (1,1) model should suffice and there is no betterment achieved by implementing a TAGARCH (1,1) model.
Research, Practical & Social implications: We suggest the implementation of a simple GARCH (1,1) model for all those investors who want to invest in Indian size indices in order to model volatility of these indices.
Originality/value: Present study is one of its kinds, investigating size indices specifically, through the two of the most popular GARCH-family models in the Indian context.
