Estimation of Price Volatility of Nifty 50 Index using ADF and GARCH (1, 1)


Published On: 2021-06-14 10:19:13

Price: ₹ 500



Author: Naveen Kumar P. and R. Minithra

Author Address: Assistant Professor, Amrita School of Agriculture Science, Amrita University, Coimbatore, Senior Research Fellow, Directorate of Agribusiness Development, TNAU, Coimbatore-641 003

Keywords: Augmented Dickey-Fuller Test, GARCH (1,1), Nifty 50, volatility

JEL Codes: G11, G17, G41.


Abstract

Volatility is one of the critical variables to make an appropriate decision in investment. Volatility is a crucial research area in financial markets. So Portfolio managers, company treasurers, and risk arbitrageurs closely observe volatility trends resulting from changes in costs that affect their investment and decisions in risk management. The objective of the study was to examine the volatility of the Nifty 50 index based on the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. Daily observations (3125) from March 3, 2008, to March 3, 2020, of stock market returns were used for analysis, and it helped to provide the volatility patterns. Augmented Dickey fuller was used to estimate volatility using the GARCH (1,) model to test stationary. The results of the ADF test revealed that financial data was stationary. The result indicated that the performance of the NIFTY 50 stock market index was highly volatile, leading to an excellent opportunity for long-term investment in any of the 12 economic sectors listed in the NIFTY 50 index.


Description

Indian Journal of Economics and Development
Volume 17 No. 2, 2021, 480-485

DOI: https://doi.org/10.35716/IJED/20286
Indexed in Clarivate Analytics (ESCI) of WoS
Scopus: Title Accepted
NAAS Score: 5.15