Investigating Volatility Persistence and Leverage Effect in Sectoral Indices of NSE: An Evaluation Using GARCH Models

Lenittamol  Abraham; Dr. Vimal George  Kurian

doi:10.14419/dxmp1372

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Authors
- Lenittamol Abraham Research Scholar, Department of Commerce, CMS College Kottayam, Kerala, India https://orcid.org/0000-0003-2321-2746
- Dr. Vimal George Kurian Associate Professor, Department of Commerce, CMS College, Kottayam, Kerala, India https://orcid.org/0000-0002-6430-4383
https://doi.org/10.14419/dxmp1372

Received date: September 15, 2025

Accepted date: November 18, 2025

Published date: December 3, 2025
GARCH Models; Sectoral indices; Volatility; Volatility Persistence; Volatility Asymmetry; ‎Leverage Effect
Abstract

Investors in the stock market always try to maximise their profit with a minimum risk. ‎Identifying volatility in the stock market will help investors reduce their risk and create a ‎healthy portfolio. A detailed analysis of volatility in the sectoral indices directs investors to ‎the sector's strengths and weaknesses.‎

‎This study aims to investigate volatility in sectoral indices of the NSE using GARCH (1,1), GARCH in Mean, and EGARCH Models. Daily closing prices of 11 major sectoral ‎indices, spanning from January 1, 2014, to June 30, 2025, are used for this study. The ‎presence of the ARCH effect with the returns is proved for all sectoral indices using the ‎ARCH-LM test. Our results proved that volatility persistence is present in all sectoral indices. ‎The GARCH-in-Mean model suggests that the increased volatility in the Metal industry and ‎the Nifty PSU Bank sector has the potential to generate high returns. The EGARCH model ‎confirms that the leverage effect is present in all sectoral indices, indicating that bad news has ‎a greater impact on volatility than positive news‎.
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Abraham, L. ., & Kurian, D. V. G. . (2025). Investigating Volatility Persistence and Leverage Effect in Sectoral Indices of NSE: An Evaluation Using GARCH Models. International Journal of Accounting and Economics Studies, 12(8), 9-17. https://doi.org/10.14419/dxmp1372
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Investigating Volatility Persistence and Leverage Effect in Sectoral Indices of NSE: An Evaluation Using GARCH Models

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