Deep Learning Tools for Predicting Stock Market Movements

18Volatility Transmission Role of Indian Equity and Commodity Markets

Harpreet Kaur^* and Amita Chaudhary

University School of Business, Chandigarh University, Mohali, India

Abstract

The rate at which a security’s price swings, i.e., increases or decreases for a specific set of returns, is how volatility is expressed. When one financial market’s volatility disruption has a significant negative effect on another financial market’s volatility (i.e., conditional variance), this is known as volatility spillover. In the modern day where financial markets are highly interconnected, it is essential to comprehend such transmission to capitalize on the benefits of portfolio diversification. The present paper investigates the volatility transmission role of two major Indian financial markets, mainly the commodity and equity futures markets. Specifically, we examine the unconditional volatility spillover among equity future index and commodity composite (Comdex) as well as sectoral (energy, metal, and agricultural) future indices. We have applied two stationarity tests along with the Diebold-Yilmaz (DY) volatility spillover model on daily realized volatility series of selected indices. Since the volatility series of sampled indices are not directly available, it is calculated for each index using the range method. Therefore, the official websites of MCX and NSE have been used to extract information regarding the high and low daily futures prices of equity and commodity indices respectively, ...