A STUDY ON THE RELATIONSHIP BETWEEN STOCK RETURNS AND VOLATILITY

Abstract

Nowadays, investors and financial advisors focus a lot of attention on ways to reduce risk while investing their savings in the stock market. These strategies include managing daily volatility and using different stock combinations. How well the model captures and how the model behaves with respect to the stock market and underlying assets determines the quality of risk measurements. This study looks at the connection between returns and volatility for the Bombay Stock Exchange (BSE), one of the Indian stock markets. The nature of volatility in the Indian stock markets is the main subject of this study. The ARCH-M model was used in this study to examine how stock market volatility behaves.