Rashmi Chaudhary

The current empirical study attempts to analyze the impact of COVID-19 on the performance of the Indian stock market concerning two composite indices (BSE 500 and BSE Sensex) and eight sectoral indices of Bombay Stock Exchange (BSE) (Auto, Bankex, Consumer Durables, Capital Goods, Fast Moving Consumer Goods, Health Care, Information Technology, and Realty) of India, and compare the composite indices of India with three global indexes S&P 500, Nikkei 225, and FTSE 100. The daily data from January 2019 to May 2020 have been considered in this study. GLS regression has been applied to assess the impact of COVID-19 on the multiple measures of volatility, namely standard deviation, skewness, and kurtosis of all indices. All indices’ key findings show lower mean daily return than specific, negative returns in the crisis period compared to the pre-crisis period. The standard deviation of all the indices has gone up, the skewness has become negative, and the kurtosis values are exceptionally large. The relation between indices has increased during the crisis period. The Indian stock market depicts roughly the same standard deviation as the global markets but has higher negative skewness and higher positive kurtosis of returns, making the market seem more volatile.

Due to many theoretical and practical shortcomings of the traditional CAPM model, this study aims at analyzing the CAPM with possible extensions. The analysis aims to know the empirical soundness of Conditional Higher Moment CAPM in emerging India’s capital market. The sample consists of 69 company’s daily stock price data from April 2004 to March 2019 from NSE 100. Panel data analysis is used on 21 cross-sections. The overall results show that when both up and down markets are incorporated separately, all three moments, namely, co-variance, co-skewness, and co-kurtosis, are priced during the normal Indian economy phase. Further, this study states that including higher moments (co-skewness and co-kurtosis) in the two-moment model provides symmetry in both the up and down markets. This is one of the first studies in the Indian Stock market explaining the variation in portfolio returns through panel data analysis by extending CAPM with conditional higher-order co-moments. The portfolio managers should consider skewness and kurtosis along with variance in constructing the optimal portfolios.