Modelling volatility effects between stock, oil, gold and forex markets: Evidence from India

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Although several studies on the integration of diverse stock markets have been conducted in the financial literature, most of them have focused on the integration and volatility spillovers across established stock markets. The present study explores the dynamics of integration and volatility spillover across gold, oil, forex, and stock markets during four significant events in India: the pre-changed government regime, the post-changed government regime, the post-Brexit referendum date, and the COVID era. Daily data from 2010 to 2022 is divided into four categories using the Chow test. This is done to examine if these events’ financial turmoil affects market interconnectivity. The unit root test determines data stationarity. The ARCH LM test examines series volatility clustering, and the BEKK GARCH test examines market volatility spillover. Results indicate that gold cannot be considered a hedge or safe haven. Secondly, market interconnectedness increased during the crisis period. Third, domestic political and geopolitical conditions globally do not increase the scale of spillover amongst financial assets, though they impact the spillover’s magnitude. The results of this study have several important implications for portfolio diversification and risk management.

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    • Table 1. Chow test results
    • Table 2. Descriptive statistics
    • Table 3. Results of the BEKK–GARCH model
    • Conceptualization
      Varsha Ingalhalli, Prachi Kolamker
    • Data curation
      Varsha Ingalhalli
    • Formal Analysis
      Varsha Ingalhalli, Prachi Kolamker
    • Investigation
      Varsha Ingalhalli, Prachi Kolamker
    • Methodology
      Varsha Ingalhalli, Prachi Kolamker
    • Supervision
      Varsha Ingalhalli, Prachi Kolamker
    • Validation
      Varsha Ingalhalli, Prachi Kolamker
    • Visualization
      Varsha Ingalhalli, Prachi Kolamker
    • Writing – original draft
      Varsha Ingalhalli, Prachi Kolamker
    • Writing – review & editing
      Varsha Ingalhalli, Prachi Kolamker
    • Project administration
      Prachi Kolamker