Introduction
Investors, policymakers, and researchers give a lot of attention to the evaluation of risk while analyzing the stock market. The quality of risk measures very largely depends on how well the econometric model captures the behavior of the underlying asset. The article examines the price volatility of, the National Stock Exchange (NSE). The focus of this article is to examine the nature of the volatility in the Indian stock markets.
Broadly, the Analysis of the stock market for the evaluation of the risk has assumed greater significance in India after the liberalization. The volatility in the prices of stocks adversely affects individual earnings and the health of the economy. Volatility in the price of the stock market can arise because of several reasons. It creates an atmosphere of uncertainty and thus it hampers effective investment decisions. Best MBA college in Bangalore
Measurement of volatility in the stock market
In every country, economic growth is essential for improving the quality of life. The Standard classical and neo-classical theories emphasize the role of investment in enhancing economic growth. The Monetary and financial sectors play a key role in mobilizing resources. Financial stability is crucial for promoting investment at large. In a position of financial stability, financial institutions and markets are able to efficiently mobilize savings, provide liquidity and allocate investment. The growing role of the financial sector in the efficient allocation of resources at appropriate prices could significantly enhance the efficiency with which our economy functions. If financial markets work well, then they will direct resources to their most productive uses. AICTE Approved PGDM college in Bangalore
The Study of Financial Asset Volatility
The study of financial assets volatility is essential to academics, policymakers, and financial market participants for various reasons. First, prediction of financial market volatility is essential to economic agents because it represents a measure of risk exposure in their investments. Second, a volatile stock market is a serious concern for policymakers because the instability of the stock market creates uncertainty and thus adversely affects growth prospects. Third, the stock market volatility causes a reduction in consumer spending. Thus, it can be seen that the study of stock market volatility is very essential and can be helpful for the formulation of economic policies and framing rules and regulations related to stock market volatility. AICTE Approved B-school in Bangalore
Role of NSE in Indian Stock Indices
The Stock Market in India is represented by the two most prominent stock indices, i.e. Bombay Stock Exchange’s (BSE) Sensitive Index (Sensex) and NSE’s NIFTY50. BSE is the older and the more often quoted index. However of late with the growing popularity of the NSE, due to its more transparent trading mechanism and lower trading cost, NSE is considered to be an essential and broad-based market index.
Conclusion
The Indian economy is currently passing through a significant historical phase of economic development. From the last period, significant policy initiatives are undertaken in the field of commerce, industry, trade, exchange rate, foreign investment, and the financial sector also. These policy measures have an influence on the functioning of the stock market and the behavior of stock prices. Volatility in the stock market has an essential bearing on the earnings of individual investors and the efficiency of the stock market in general for channelizing resources for its effective uses.
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