1.
Karam Pal Narwal
– Haryana School Of Business, Guru Jambheshwar Univ. Of Science And Tech., Hisar, Haryana
2.
Ved Pal Sheera
– Haryana School Of Business, Guru Jambheshwar Univ. Of Science And Tech., Hisar, Haryana
3.
Ruhee Mittal
– Haryana School Of Business, Guru Jambheshwar Univ. Of Science And Tech., Hisar, Haryana
Abstract
The present study examine implied volatility
spillover and transmission between emerging (India)
and mature stock markets (US, France, Germany and
Switzerland), measured by their respective implied
volatility indices i.e. IVIX, VIX, VCAC, VDAX and VSMI. The asymmetries in Implied Volatility
(IV) indices of selected countries are examined
using Engle and Ng (1993) test. The spillovers and
transmission are examined in multivariate-GARCH
framework using BEKK and DCC model. The analysis
is done using weekly data for period spanning from
Nov, 2007 to Oct, 2011 March. The main findings of study document
asymmetries in the IV indices exist for the Indian,
American and French markets. The BEKK-GARCH
model results show that conditional variances of implied
VI of India, Germany, French and Switzerland strongly
affected by their own past shocks and volatility effects.
The DCC model reveals that there is a moderate-level
of correlation between the selected markets. The results of the present
study can be used by the portfolio managers and market
participant for yielding the diversification benefits in
short-run by including IV indices as an asset in their
portfolio.
Keywords Implied Volatility Index, Indian Stock Market, BEKK-GARCH, DCC, VIX, VSMI
