Has COVID -19 Pandemic altered the Volatility Spillover and Connectedness based on Size of Market Portfolios?

Abstract

Purpose: The present research article finds the volatility spillover and connectedness for
the Indian financial markets. The study also assesses how the volatility is transmitted a
monthto the three significantBombay Stock Exchange’s three significant Indices. The
“Sensex represents the size effect,” the primary Index, Mid Cap Index, and the Small Cap
Index. The study also focuses on finding the impact of the present COVID -19 impact.
Design / Methodology / Approach: The volatility transmission and the connectedness
have been brought forth to its popularity among Diebold and Yilmaz’s researchers.
David Gabauer further extended the method to its present state of using the TVP-VAR
methodology, which overcomes the Diebold and Yilmaz method’s shortcomings.
Findings: The method does represent that 58% of the volatility spillover is from within
the model. This means that the size alone is responsible for the 58% volatility. The largest
dispenser of the spillover is from the Mid Cap.
Originality / Value: Researchers have widely used the method of Diebold and Yilmaz.
However, the use and analysis of the Indian financial markets have been significantly less.
Especially the size effect using the Gabauer forwarded method of Diebold and Yilmaz
Paper type: View Point