Open AccessImpact of Foreign Institutional Investors on the Volatility of Indian Stock Market using GARCH Model
Author(s) -
Prateek Bansal,
Om P. Agrawal
Publication year - 2018
Publication title -
focus : journal of international business
Language(s) - English
Resource type - Journals
eISSN - 2395-258X
pISSN - 2347-4459
DOI - 10.17492/focus.v5i01.13139
Subject(s) - autoregressive conditional heteroskedasticity , volatility (finance) , stock market , econometrics , unit root test , skewness , economics , financial economics , institutional investor , stock market index , unit root , finance , geography , cointegration , corporate governance , context (archaeology) , archaeology
Foreign institutional investors have played an important role in the development of Indian stock market. In this paper, we study the relationship between the FII capital flows and the volatility of Indian stock market. To conduct the study, daily Index and trading data of SENSEX, NIFTY and FIIs was collected for fifteen years from April 1, 2001 to March 31, 2017. After testing for data stationarity using Augmented Dickey–Fuller test (ADF) unit root test, different statistical tools were applied such as S.D., mean, variance, skewness, correlation and GARCH model for testing the impact of FIIs flows on stock market volatility. The study concludes that there is strong relationship between the FIIs and the stock market return. Further, positive correlation exists between the variables and volatility transmission is there from FIIs to both the indices.