Volatility and Forecasting of BSE BANKEX

In this paper we model the volatility patterns of the BSE Bankex index based on daily data using both symmetric and asymmetric GARCH models. Our findings reveal asymmetric GARCH models having leverage property uncover uneven market reactions to positive and negative innovations thus rendering doubts on the appropriateness of symmetric GARCH models. There is also strong evidence of positive risk premium coefficient. Among the alternative GARCH models employed, EGARCH(2,1)-M is the best conditional volatility model and also has the best forecasting performance in the short-term horizon