A study of Indian stock market volatility and economic indicators using ARCH model
Gaurav Bafna, Dr. Taral M Patel
The present paper studies estimating the volatility of the BSE index and economic indicators using ARCH (1,1) model. The Quarterly Data utilized in the study of BSE index return and selected economic indicators like Money Supply (M3), Exchange Rate, Foreign Institutional Investors (FII), Gross Domestic Product (GDP), Export of goods & services, And Import of goods & services dated from 1st-Jan-2001 to 31st-Dec-2018. The following time span used to identify the volatility of stock market before recession and after recession period and to evaluate the relationship between Indian Stock Market volatility and selected macroeconomic indicators. It confirmed that the BSE index and economic indicators are having highly positive correlation among the studied period. The model helps investor to identify that BSE SENSEX is highly volatility during the Post-recession period as compared to Pre-Recession period due to changes take place in selected economic indicators (Fundamentals).