Title: Volatility spillover impact of FII and MF net equity flows on the Indian sectoral stock indices: recent evidence using BEKK-GARCH

Authors: Vaibhav Aggarwal; Adesh Doifode; Mrityunjay Kumar Tiwary

Addresses: Indian Institute of Management, Lucknow, 226013, India; Pune Institute of Business Management, Pune, 412115, India ' Pune Institute of Business Management, Pune, 412115, India ' Indian Institute of Management, Lucknow, 226013, India

Abstract: This study investigates the shock transmission and volatility spillover between nine Indian stock market sectoral indices with both foreign institutional investors (FII) and mutual funds (MF) net equity flows using the BEKK-GARCH model. We use daily data covering the period from 1 January 2010 to 31 May 2019. Significant volatility spillover was observed from FII net equity inflows to five sectoral equity indices, while there was no volatility spillover from MF flows to any sectoral indices except telecom. Further, there was the presence of shock transmission from FII flows to five sectoral indices, but for MF flows, shock transmission was observed only in healthcare. Findings suggest that FII flows influence the stock market volatility, but MF flows are not having a significant impact.

Keywords: volatility; spillover; sector; foreign institutional investors; FII; MF; GARCH; India; BEKK; equity; transmission.

DOI: 10.1504/IJICBM.2021.114084

International Journal of Indian Culture and Business Management, 2021 Vol.22 No.3, pp.350 - 363

Received: 15 Oct 2019
Accepted: 13 Jan 2020
Published online: 08 Apr 2021 *

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