JJEM: Special Edition 1 (December 2023)
JJEM: Special Edition 1 (December 2023)
2023-12-08
Dynamics of Return and Volatility interactions between Exchange Rates and NSE Sectoral Indices: A Comparative Analysis Pre and Post COVID-19 Pandemic.
Mr. Ananth Alias Rohith Bhat P, Dr. Shakila B and Dr . Prakash Pinto
This paper investigates the dynamics of return and volatility spillover effects between exchange rates and National Stock Exchange (NSE) sectoral indices, with a focus on the distinct periods before and after the outbreak of the COVID-19 pandemic. By employing the robust Dynamic Conditional Correlation GARCH (DCC-GARCH) model, this study assess relationship between these critical financial indicators. Empirical analysis is carried out using daily return data of USD/INR exchange rate and NSE sectoral indices, spanning both the pre-pandemic and post-pandemic eras ranging from 1st January 2018 to 31st October 2023. The DCC-GARCH model is applied to capture the time-varying correlations and conditional volatilities within these datasets. The findings of the study revealed that in short run there is a spillover effect from exchange rates to Indian stock markets. Investors must be cautious to invest in the Indian stock market for the long period of time as there is volatility spillover or volatility transmission observed in few sectors of NSE post covid.
Exchange Rate,NSE Sectoral Indices DCC-GARCH; volatility spillover;COVID-19 Pandemic.