An Empirical Investigation of Asymmetric Volatility, Trading Volume and Risk-Return Relationship in the Indian Stock Market
Author | : Pramod Kumar Naik |
Publisher | : |
Total Pages | : 25 |
Release | : 2013 |
ISBN-10 | : OCLC:1308981627 |
ISBN-13 | : |
Rating | : 4/5 (27 Downloads) |
Download or read book An Empirical Investigation of Asymmetric Volatility, Trading Volume and Risk-Return Relationship in the Indian Stock Market written by Pramod Kumar Naik and published by . This book was released on 2013 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this article is to investigate the volatility asymmetry, volatility-volume relationship by considering trading volume as a mixing variable, and the risk-return relationship in the Indian stock market. Daily data from January 2, 1997 to May 30, 2013 for S&P CNX Nifty are used for the empirical analysis. First, we employ GARCH, EGARCH and GJR-GARCH models to examine the volatility pattern in the stock market. Second, both contemporaneous and lagged trading volumes are augmented in the volatility model to empirically verify the validity of Mixture of Distribution Hypothesis (MDH) and Sequential Information Arrival Hypothesis (SIAH). The level of volatility persistence also compared. Finally, GARCH in mean extension has been tried to investigate whether the risk-return trade-off exist in the market. The findings show significant volatility asymmetry supporting the leverage effect; provide supports to MDH but the volatility shocks are found to be highly persistent even after incorporating trading volume. The study also finds evidence of no significant relationship between risk and return. The implication of the findings may be applicable to traders, speculator as well as the financial decision makers and practitioners as the trading volume reflects the information about market expectation.