Volatility Spillover and Connectedness Between SME and Main Markets of India and China

Pradeep Kumar Behera (), Naresh Chandra Sahu () and Abhisek Mahanta ()
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Pradeep Kumar Behera: School of Humanities, Social Sciences, and Management Indian Institute of Technology (IIT) Bhubaneswar
Naresh Chandra Sahu: School of Humanities, Social Sciences, and Management Indian Institute of Technology (IIT) Bhubaneswar
Abhisek Mahanta: School of Humanities, Social Sciences, and Management Indian Institute of Technology (IIT) Bhubaneswar

Asia-Pacific Financial Markets, 2025, vol. 32, issue 4, No 9, 1407-1429

Abstract: Abstract The study aims at investigating the volatility and connectedness aspect of the SME and main market indices of India and China i.e., SENSEX, BSE SME IPO, SZSE Composite and SME 300. GARCH and TARCH models are used to determine the symmetric and asymmetric volatility within the indices respectively using daily data from January 2013 to March 2024. The DCC-GARCH model is applied to analyse the inter-country and intra-country volatility spillover. While, TVP-VAR model measure the connectedness between the indices. The empirical findings reveal that the SME index of India gives higher returns than China. On the volatility front, the SME of India and China have same degree of volatility. In the long term, there is a significant the spread of volatility between the SENSEX and SME index in India. The findings of the study show the high degree of long-term dependence and interconnectedness of SME markets of India and China. Further, it is found that the main market and SME market indexes of India are the net receivers of volatility, and the index of the Chinese market is the net transmitter. The Total volatility spillover index between main and SME is low in India as Compare with China. This study can help to mutually beneficial economic stability, and risk management. Also, it can help investors to take better investment decision.

Keywords: Small and medium enterprises exchanges; Volatility spillover; DCC-GARCH; TVP-VAR (search for similar items in EconPapers)
JEL-codes: C58 G17 L25 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10690-024-09492-5

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