An empirical study to estimate volatility of Indian stock market during pre and post covid times

Abstract

In the present study, researchers tried to measure the volatility of Indian stock exchange before and after COVID- outbreak and also to compare the volatility pattern in both groups. To conduct the study, the researchers has collected 30 months daily closing price of NIFTY 50 prior to the COVID outbreak [From 9^th September 2017- 9^th march 2020] and 30 months after outbreak [From 10^th march 2020 – 10^th September 2022].  The researcher has used various statistical tools such as descriptive statistics, Augmented Dickey fuller test and Phillips Perron test for stationarity. The researcher used ARCH model, GARCH model and GARCH-M model. The study revealed that, the daily return calculated for both categories are stationary at level, found from both ADF and PP test. From the ARCH – LM test they got that there was an arch effect in both the categories. The found that for pre-covid time and also for post-covid time GARCH [1,1] model was the best fitted model. From the study, they have concluded that in both categories’ volatility clustering was there but the shocks during the Post-pandemic time was more persistent as compared to pre pandemic. As the sum of ARCH & GARCH coefficient model was near to unity during the pre-pandemic time, indicating that the stock prices will revert back to the historical value after a certain time period.