Understanding Risk and Return: A Study of BSE Volatility in the Post-Pandemic Era

ABSTRACT

In the modern period, investors and financial advisors are focusing a great deal of emphasis on the ways in which they may reduce the risk associated with investing their savings in the stock market. This can be accomplished via a variety of stock combinations and strategies, including the management of daily volatility. Whether or not a model accurately depicts the behavior of underlying assets and the stock market is a significant factor in determining the efficacy of risk mitigation strategies. In this article, the link between returns and volatility for the Indian stock markets, namely the Bombay Stock Exchange (BSE), is investigated. When compared to other markets, the return on the BSE over the past six months was very high. Unit root (ADF) tests and the ARCH-M model are examples of what researchers do. The primary purpose of this research is to investigate the daily performance of the stock market in relation to the indexes that are issued by the BSE. The characteristics of the volatility that exists in the Indian stock markets are the subject of this research. For the purpose of this investigation, the ARCH–M model was used to investigate the behavior of stock market volatility. According to the findings of this research, the ARCH (1) model is the most suitable option, and it provides adequate outcomes for making proper decisions on the purchase and sale of stocks. There is a lack of efficiency in the market, and the behavior of prices on the stock market is random during the time period under investigations.

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