AN EMPIRICAL STUDY OF THE EFFECT OF SPILLOVER OF VOLATILITY OF THE INDIAN STOCK MARKET IN THE BRICS STOCK EXCHANGES
This paper study the spillover effect of Indian Stock Markets on the BRICS stock market in relation to portfolio diversification and try to find out a suitable diversification plan available for the portfolio managers globally who has an interest in investing in India. Several methods have been applied which include Granger Causality test, Vector Auto Regression and Dynamic Conditional Correlation to understand the spillover effect in the study. Bidirectional causality and unidirectional causality were tested between India and BRICS economy stock market. The VAR results show that BRICS economies does not affect the return of the Indian stock market. The results of the DCC-MGARCH also confirms these results and we observe no volatility spillover. This brings us to the basic understanding that Indian portfolio managers should explore the possibility of investing in the BRICC stock markets to diversify their portfolio and risk.
BRICS Economy Stock Markets Volatility Spillover, Dynamic Conditional Correlation, Portfolio Diversification, Risk Management.