VOLATILITY SPILLOVER BETWEEN NIFTY FIFTY INDEX AND SELECTED MUTUAL FUNDS IN INDIAN STOCK MARKET: DCC GARCH TECHINQUE
DOI:
https://doi.org/10.29121/shodhkosh.v7.i1.2026.8200Keywords:
DCC-GARCH, EGARCH, Volatility Spillovers, Mutual FundAbstract [English]
Purpose: This study aims to examine the volatility spillover effects and measure the time varying correlations between nifty fifty index and selected mutual funds in Indian mutual fund market. Methodology: The research uses Exponential GARCH proposed by Nelson (1991) to explore the direction and magnitude of spillover effects between nifty fifty index and selected mutual fund. It employs Dynamic Conditional Correlation (DCC) GARCH proposed by Engle (2002) to demonstrate the time varying conditional correlation between heteroscedastic coefficients of the share (nifty) and mutual funds market. Findings: Empirical results show that significant and asymmetric bi-directional volatility spillover effects exist in case of most of the selected mutual funds even though, the magnitude of volatility spillover is found larger in the direction from nifty to equity mutual fund. The dynamic correlation between the conditional variance of the nifty and mutual fund markets is found to be significant in case of all the selected mutual funds. It proves that significant volatility spillover effect is present between nifty fifty index and selected mutual funds. Implications: Understanding of volatility transmission and interrelationship between nifty and mutual fund market will help investors make right investment decisions, portfolio optimization and financial risk management. Policy makers and regulators can use this knowledge in planning and implementing appropriate regulatory framework. Originality/Value: Much of the past research focuses on inter market volatility spillover taking into consideration two or more different financial markets. This study focuses on intra market volatility spillover by studying the interactions of stock and mutual fund markets. Also, considering the time-varying nature of conditional correlations, this study employs EGARCH and multivariate GARCH (DCC) to capture the volatility spillover effects instead of univariate GARCH or standard linear VAR models.
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