Modelling Volatility of BSE Realty Index using Conditional Heteroscedasticity Models

Mr. Dhananjaya Kadanda; Mr. Krishna Raj

doi:https://doi.org/10.17492/manthan.v4i02.11462

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Modelling Volatility of BSE Realty Index using Conditional Heteroscedasticity Models

Dhananjaya Kadanda, Krishna Raj

Vol 4, Issue 2, July - December 2017 | Pages: 13-28 | Research Paper

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https://doi.org/10.17492/manthan.v4i02.11462

Published Online: November 30, 2017

Author Details ( * ) denotes Corresponding author

1. * Dhananjaya Kadanda, Doctoral scholar, Center for Economic Studies and Policy, Institute for Social and Economic Change, Bengaluru, Karnataka, India (dhananjayak@isec.ac.in)

2. Krishna Raj, Professor, Center for Economic Studies and Policy, Institute for Social and Economic Change, Bengaluru, Karnataka, India (krishnaraj@isec.ac.in)

This study empirically examines the nature of volatility in BSE Realty Index using daily closing price of BSE Realty Index for five and half years period from January 2011 to June 2016. The study employed conditional heteroscedasticity models, both symmetric and asymmetric, for the analysis. The study found that the volatility is persistent in the Index return indicating the presence of volatility clustering in the series. Further, the study reports the presence of asymmetric or leverage effect in the series as the leverage coefficient γ is significant in EGARCH model indicating that negative shocks have significant effect on volatility. However, the study did not find significant risk-return trade-off in the series.

Keywords

Conditional volatility; Volatility clustering; GARCH model; Leverage effect

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