The IUP Journal of Accounting Research and Audit Practices:
Application of GARCH Models for Volatility Modeling of Stock Market Returns: Evidence from Indian Stock Exchange

Article Details
Pub. Date : April, 2021
Product Name : The IUP Journal of Accounting Research and Audit Practices
Product Type : Article
Product Code : IJARAP30421
Author Name : Neeti Mathur, Himanshu Mathur and Satish Chandra Tiwari
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 13



Stock markets significantly contribute to the economic development of any nation. They have a volatile character, which results in uncertainty of the returns; the variability causes volatility in speculative market prices and instability of business performance. Volatility plays a significant role in the investors, managers, policymakers and researchers' financial decisions as it can assess the risk exposures in their investments and the uncertainty in stock returns. The risk-averse investor avoids investment in a highly volatile market. The stock return forecasting leads to volatility forecasting. The paper analyzes the volatility concerning the Bombay Stock Exchange. The daily data of S&P Sensex 30 has been collected and used to calculate the volatility for the last 3 years (April 2016 to March 2019). The preliminary analysis is done based on descriptive statistics stationery test, normality test and serial correlation test. Volatility modeling is done by the ARCH and GARCH family models. The findings help investors make the right investment decisions in the Indian stock market in the presence of its volatile character.


Indian stock market has a prominent position in the globe. In 2018, India's healthy economic growth had supported its stock market to become the world's seventh largest market by volume of transactions and market capitalization, which is $2.08 tn. India's economic growth propels higher market capitalization. India's ascent reflects the growing blow of emerging markets. The two major Indian stock exchanges are National Stock Exchange and the Bombay Stock Exchange (BSE); NIFTY and SENSEX are two essential indices of these stock exchanges.


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