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Year 2025
Volume/Issue/Review Month Volume-XVIII | Issue-II | Jul.-Dec.
Title Measuring Resilience Through Systemic Risk with Reference to Indian Indices
Authors Manik Chand Dey, Dr. Jakki Samir Khan, Dr. Sangeeta Mohanty
Broad area Finance
Abstract This paper studies financial market resilience indirectly through an important indicator; systemic risk. We propose four measures of systemic risk in important indices of Indian capital market using correlation, principal component analysis (PCA), Granger causality test and the regime switching model. We empirically examined daily return data from 2006 to 2010 in two sub-periods. Results of PCA and correlation suggest existence of a substantial degree of interconnectedness and relatively low liquidity during and after crisis period among three indices i.e., among Nifty 50, Nifty 5Yr G sec and Nifty commodities except for the Nifty bank. However, before crisis, Nifty bank has a positive degree of linkage with three indices except Nifty commodities. Result of pairwise Granger causality test implies more asymmetry of information flow across indices post crisis. This may imply a relatively lower degree of resilience of Indian capital market despite of considerable liquidity of Nifty indices in normal period. We found no evidence of sudden regime change from two state MS GARCH model for all the select four indices during the sample period. This may indicate a relatively stable return generating process. This study will have implications for regulators and policymakers.
DOI https://doi.org/10.63340/SAMT/10000001
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1https://www.niftyindices.com/reports/historical-data

2https://link.springer.com/content/pdf/bbm:978-1-137-44217-8/1.pdf