Title: Dynamic volatility spillover connectedness of sectoral indices of commodity and equity: evidence from India

Authors: Shriram Anil Purankar; Vipul Kumar Singh

Addresses: Jaypee Business School, Jaypee Institute of Information Technology University, A-10, Sector 62, Noida, 201307, India ' National Institute of Industrial Engineering (NITIE) (Under Ministry of HRD, Government of India), Vihar Lake, Mumbai, 400087, India

Abstract: The objective of this study is to evaluate the static and dynamic volatility spillover correlation connectedness of the Indian commodity and equity indices in financial and macro-economic perspective. The purpose is to gain insights of agriculture, metal and energy commodity prices vis-à-vis with sectoral equity indices like bank, financial, metal, energy, etc. through the spillover effect from each other. We also try to see how far the fundamental factors can explain the spillover correlation dynamics of commodity and equity prices. To conduct this study the dynamic conditional correlation (DCC) GARCH methodology is employed. The result gives an insight to investors that how well the factors are connected and how they react due to the spillover. The study reveals a weak spillover correlation between the commodity and equity sectoral indices over the sample period, and most of the time they are slightly negatively correlated with each other, offering adequate space for significant portfolio diversification between equity and commodity.

Keywords: volatility; spillover; correlation; DCC GARCH; MCX; NCDEX; NSE; sectoral indices; commodity; India.

DOI: 10.1504/IJMP.2020.105670

International Journal of Management Practice, 2020 Vol.13 No.2, pp.151 - 177

Received: 15 Aug 2018
Accepted: 21 Jan 2019
Published online: 09 Mar 2020 *

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