Mantu Kumar Mahalik
Doctoral Fellow, Indian Institute of Technology, India.
M. Suresh Babu
Assistant Professor, Indian Institute of Technology, India.
Umakant Dash
Associate Professor, Indian Institute of Technology, India.Multivariate GARCH Modeling of Sector Volatility
Transmission: Empirical Evidence from India
How shocks in one market influence the returns and volatility of
other markets has been an important question for portfolio managers.
Although the commodity futures market is often regarded as a good
vehicle for investment diversification, the dynamics of its volatility
transmission have been largely ignored in emerging economies like
India. In this context, the study makes an attempt to examine the
volatility transmission of spot and futures returns across sectors include
agriculture and non-agriculture in India. By employing the Multivariate
GARCH model (BEKK,1995), the study empirically found that the
futures trading plays a dominant role in volatility transmission for non-
agriculture silver commodity, while bidirection causal relations exist
from spot to futures and vice-versa for agriculture and non-agriculture
commodities include guarseed, soybean and zinc. From a policy
perspective, there is a need for further theoretical research to
understand these interesting bidirection cross-market interaction results
for guarseed, soybean, and zinc.