Abstract

This paper studies the global financial crisis and the effect of the crisis on stock market volatility by employing the GJR GARCH model. Daily closing price of indices in the National Stock Exchange (NSE) and the Mumbai Stock Exchange (BSE) from March 1st, 2005 to December 30th 2012 were considered for the analysis. The study covers two periods: pre-crisis (from March 01, 2005 to January, 30 2008) and post-crisis (from February 01, 2008 to December 30, 2012). To demonstrate the influence of crisis on stock returns volatility, a dummy variable was introduced in the GJR GARCH model. It is found that the volatility of mean returns had increased during the post crisis period as compared to the pre-crisis period. The findings also suggest that the recent financial crisis had an adverse impact on mean returns and the volatility in the Indian stock market.

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