Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/304016 
Year of Publication: 
2023
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 11 [Issue:] 1 [Article No.:] 2189589 [Year:] 2023 [Pages:] 1-33
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
Does Indian sovereign yield volatility reflect economic fundamentals, or whether it is a self-generated force flowing through markets with little connection to such fundamentals? To answer the question, this research explores the volatility dynamics and measures the persistence of shocks to the sovereign bond yield volatility in India from 1 January 2016, to 18 May 2022, using a family of GARCH models. The empirical results indicate the high volatility persistence across the maturity spectrum in the sample period. However, upon decomposing the markets into bull and bear phases, our results support the existence of weak volatility persistence and rapid mean reversion in the bear market. This shows that the economic response policies implemented by the government during the pandemic, including fiscal measures, have a restraining effect on sovereign yield volatility. For a positive Ú, the results suggest the possibility of a "leverage effect" that is markedly different from that frequently seen in stock markets. Results further indicate that the fluctuations in Indian sovereign yields cannot be dissociated from inflation and money market volatility. Our findings herein provide valuable information and implications for policymakers and financial investors worldwide.
Subjects: 
COVID-19
leverage
mean reversion
sovereign bond yield
symmetric GARCH
volatility
JEL: 
C22
C52
E430
E440
G10
G17
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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