Spillover effects of the 2008 global financial crisis on the volatility of the Indian equity markets: Coupling or uncoupling? A study on sector-based data - Aix-Marseille Université Access content directly
Journal Articles International Review of Financial Analysis Year : 2014

Spillover effects of the 2008 global financial crisis on the volatility of the Indian equity markets: Coupling or uncoupling? A study on sector-based data

Abstract

This paper focuses on the following question: has the global financial stress in the US markets during the subprime crisis induced a persistent volatility of Indian equity stocks? We answer this question using sector-based data and we propose a simple stochastic volatility model augmented with exogenous inputs (financial stress indicators in the US market). We derive analytically the autocorrelation of the squared returns using cross-moments and estimate the impact of several variables such as the CDS spreads, the ABCP spreads, market liquidity, the volatility of the S&P 500 using a Kalman filter approach with the impact captured through Almon polynomials. We find a strong evidence of persistent volatility irrespective of the sector and interpret this finding as the result of two factors: the lower liquidity of the Indian equity markets during the subprime crisis and a wake-up call effect.
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hal-01474429 , version 1 (22-02-2017)

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Gilles Dufrénot, Benjamin Keddad. Spillover effects of the 2008 global financial crisis on the volatility of the Indian equity markets: Coupling or uncoupling? A study on sector-based data. International Review of Financial Analysis, 2014, 33 (C), pp.17--32. ⟨10.1016/j.irfa.2013.07.004⟩. ⟨hal-01474429⟩
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