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Information transmission between small and large stocks in the National Stock Exchange in India: An empirical study

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  • Karmakar, Madhusudan

Abstract

The study investigates return and volatility spillover effects between large and small stocks in the national stock exchange in India using daily index data on S&P CNX Nifty, CNX Nifty Junior and CNX Midcap. The VAR model together with the variance decomposition (VDC) and the impulse response function (IRF) analysis have been employed to uncover both casual and dynamic relationship between the large stocks and small stocks. The results show that there are very significant return spillovers from the market portfolio of large stocks to the portfolio of small stocks. To investigate the volatility spillover the study has used standard BEKK model and asymmetric BEKK model. Although, based on the standard BEKK model we have observed unidirectional volatility spillovers from the portfolio of large stocks to the portfolio of small stocks, the finding was less reliable. The more reliable finding, which is based on asymmetric BEKK model, is that there is bidirectional volatility spillover between the portfolio of large stocks and the portfolio of small stocks.

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  • Karmakar, Madhusudan, 2010. "Information transmission between small and large stocks in the National Stock Exchange in India: An empirical study," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 110-120, February.
    • Handle: RePEc:eee:quaeco:v:50:y:2010:i:1:p:110-120
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    3. Koulakiotis, Athanasios & Kartalis, Nikos & Lyroudi, Katerina & Papasyriopoulos, Nicholas, 2012. "Asymmetric and threshold effects on comovements among Germanic cross-listed equities," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 327-342.
    4. Trofimov, Ivan D., 2013. "Nonparametric Approach to Portfolio Diversification: The Case of Australian Equity Market - Un approccio non-parametrico alla diversificazione del portafoglio: il caso del mercato azionario australian," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 66(1), pages 87-112.
    5. Trofimov, Ivan D., 2013. "Nonparametric approach to portfolio diversification: the case of Australian equity market," MPRA Paper 79562, University Library of Munich, Germany.
    6. Sayantan Bandhu Majumder & Ranjanendra Narayan Nag, 2018. "Shock and Volatility Spillovers Among Equity Sectors of the National Stock Exchange in India," Global Business Review, International Management Institute, vol. 19(1), pages 227-240, February.
    7. Qamar Ishtiaq & Fahad Abdullah, 2015. "Ownership Concentration and Cross-Autocorrelation in Portfolio Returns," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 7(2), pages 85-104, October.
    8. Afees A. Salisu & Kazeem Isah, 2017. "Modeling the spillovers between stock market and money market in Nigeria," Working Papers 023, Centre for Econometric and Allied Research, University of Ibadan.
    9. Nguyen, Trang & Chaiechi, Taha & Eagle, Lynne & Low, David, 2020. "Dynamic transmissions between main stock markets and SME stock markets: Evidence from tropical economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 308-324.
    10. Madhusudan Karmakar & Girja Kant Shukla, 2016. "The Effect of Spillover on Volatility Forecasting: An Empirical Study in Indian Stock Market," Metamorphosis: A Journal of Management Research, , vol. 15(1), pages 20-30, June.
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