Modeling Stock Market Return Volatility: GARCH Evidence from Nifty Realty Index

Abstract

Basic objective of study was to examine the effect of ARCH and GARCH model on price volatility of Nifty Realty Index along with that analysing leverage effects and volatility clustering. Volatility shocks were measured bydaily closing data of Realty Index of National Stock Exchange. Descriptive analysis of study explained distribution of daily returns were non- normal showing negative skewness and excess kurtosis. Unit root test confirms presence of stationarity in the data and ARCH-LM test exhibits presence of heteroskedasticity in the residual series, which thereby directs towards application of ARCH and GARCH model.Study concluded that GARCH (1,1) model explained the impact of past volatility due to its influence on current volatility. The data is also supported by volatility persistence which influence the GARCH (1,1) model and leadto increase in volatility and thereby affect its returns