Response Asymmetry in Return and Volatility Spillover from the US to Indian Stock Market

Abstract

Empirical studies show that the return and volatility shocks in the US stock market have significant impact on the return and volatility dynamics of emerging stock markets including India. This study examines whether the spillover effects from the US to Indian stock market display asymmetric characteristics. Precisely, it addresses the following two issues: (1) whether the Indian stock market reacts differently towards positive and negative shocks from the US market, and (2) whether there is a different response pattern of the Indian stock market towards the return and volatility shocks from the US market during the bear and the bull market phases. The study is based on daily closing values of SP however, there seems some interaction taking place between stock market trends and asymmetric response to positive and negative shocks.