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Abstract
This study examines jump dynamics and conditional variance in the Indian equity market by employing ARJI-GARCH (1, 1) model (proposed by Chan and Maheu 2002) along with its various versions, that is, and ARJI-ht across the sample years from 2000 to 2017. The findings support the existence of jump intensity, whereby past jump intensity is observed to have a substantial impact on current intensity compared with a shock. Jump intensity increased the aftermath of the Lehman Brothers’ episode and demonetization drive undertaken by the incumbent government. All these findings are critically important for the policy makers and market participants.
TOPICS: Wealth management, emerging markets, equity portfolio management
Key Findings
• Past jump intensity is observed to have a more substantial impact on current intensity than shocks.
• Economic shocks act as catalyzing agents in devising jump dynamics in stock returns.
• It is important to devise risk management strategies while understanding the response of domestic markets to indigenous as well as foreign shocks.
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US and Overseas: +1 646-931-9045
UK: 0207 139 1600