Financial market volatility: Does banking concentration play a role?

Mohammad Zeeshan

Finance Research Letters, 2024, vol. 68, issue C

Abstract: This study examines the relationship between banking concentration and financial market volatility in India. A challenge in analyzing this relationship is the differing frequencies of the data. Banking concentration data tends to be available quarterly compared to the high-frequency nature of volatility data of financial market. To address this issue, a GARCH–MIDAS model is employed, which is capable of effectively relating data with dissimilar frequencies. We quantify bank concentration using the n-bank concentration ratio and the Herfindahl–Hirschman Index. The analysis reveals a positive association between higher banking concentration and increased volatility in the Indian equity and bond markets.

Keywords: Banking concentration; Financial market volatility; GARCH-MIDAS model; Herfindahl–Hirschman Index; Concentration ratio (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:68:y:2024:i:c:s1544612324009905

DOI: 10.1016/j.frl.2024.105960

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