The Impact of COVID-19 Pandemic on the Relationship between India’s Volatility Index and Nifty 50 Returns

Jyothi Chittineni

doi:10.46281/ijfb.v4i2.731

Jyothi Chittineni IBS - Hyderabad, The ICFAI Foundation for Higher Education https://orcid.org/0000-0002-3838-6995

DOI: https://doi.org/10.46281/ijfb.v4i2.731

Keywords: India VIX, Inter-Temporal Relation, Asymmetric Relation, Nifty Returns, COVID-19.

Abstract

The paper intends to re-examine the relationship between India’s Implied Volatility Index (IVIX) and Nifty 50 Returns during this COVID-19 pandemic. The study results are important for two reasons, one is to understand whether Indian VIX is fulfilling the purpose of measuring the near future volatility of Nifty 50 during this pandemic, and secondly, it reports the impact of COVID-19 on the investors’ perceptions about the returns and its volatility. The study results documented that the Nifty return and IVIX are moving independently during the COVID-19 pandemic and there is no association between market size and the market move. The one period lagged Nifty returns have a significant influence on the future market volatility. The combined impact of negative and positive Nifty returns on IVIX is not significant during the COVID-19 period. This implies that the Indian investors are not much worried about the fluctuation in the market price or size of the market during the COVID-19 pandemic period. The investors might be taking the market decline as an opportunity to invest and market rise as an opportunity to sell the stocks. Indian investors are much focused on the fundamentals than the market movements during this pandemic. The study results are important for the fund managers, policymakers, and analysts to understand the dynamics of emerging market volatility and the trading behavior of Indian investors.

Author Biography

Jyothi Chittineni, IBS - Hyderabad, The ICFAI Foundation for Higher Education

Assistant Professor (Finance and Accounting)

IBS - Hyderabad, The ICFAI Foundation for Higher Education

(Declared as Deemed-to-be University U/s 3 of the UGC Act 1956)

Dontanapally Campus, Shanker Pally Road, Hyderabad, India

E-mail: [email protected]

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