Title: Causal relation and dynamic volatility spillover between commodity market and stock market: empirical evidence from India

Authors: Ruchika Kaura; Nawal Kishor; Namita Rajput

Addresses: Atma Ram Sanatan Dharma College, University of Delhi, India ' School of Management Studies, Indira Gandhi National Open University, India ' Sri Aurobindo College (Evening), University of Delhi, India

Abstract: The study aims to investigate the causal relationship and dynamic volatility spillover across commodity market and stock market in India. The study is based on Nifty index of NSE and commodity market indices of MCX. The findings highlight the existence of strong linkages between commodity market indices and stock market index, Nifty. Results of VAR model indicate that causal relationship is present from commodity market indices towards Nifty. The results of DCC-GARCH model show that dynamic volatility spillover between the conditional variances of all commodity market indices and Nifty is significant implying that any disturbance in one market leads the other market to become more volatile. The findings of this study can be useful for portfolio managers, policy makers and regulators to devise substitution and risk management strategies and to understand the macroeconomic implications of one market shocks on the other market.

Keywords: vector autoregressive; VAR; DCC-GARCH; causality; dynamic volatility spillover; commodity market; stock market; Nifty; India.

DOI: 10.1504/AAJFA.2022.123053

Afro-Asian Journal of Finance and Accounting, 2022 Vol.12 No.2, pp.232 - 253

Received: 28 Aug 2018
Accepted: 28 Feb 2019
Published online: 26 May 2022 *

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