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Abstract

This article aims at studying the stock price behavior & modeling the volatility of banking sector of India. It also investigates if there is any asymmetric volatility in its return structure. Returns of Bank Nifty index have been used to proxy the Indian banking sector over last ten years period starting from April 1st, 2009- Jan 1st,2019. The return series exhibit heteroskedasticity, volatility clustering & has fat tails. GARCH (1, 1) model has been used to capture the symmetric effects and among the asymmetric models, EARCH (1, 1) has been used. The ARCH in Mean model reported that Indian banking sector stocks offer  risk premium to the investors.  Long volatility persistence has also been reported over the period considered. This article aims at studying the stock price behavior & modeling the volatility of banking sector of India. It also investigates if there is any asymmetric volatility in its return structure. Returns of Bank Nifty index have been used to proxy the Indian banking sector over last ten years period starting from April 1st, 2009- Jan 1st,2019. The return series exhibit heteroskedasticity, volatility clustering & has fat tails. GARCH (1, 1) model has been used to capture the symmetric effects and among the asymmetric models, EARCH (1, 1) has been used. The ARCH in Mean model reported that Indian banking sector stocks offer  risk premium to the investors.  Long volatility persistence has also been reported over the period considered.

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