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This research empirically investigates the characteristics and dynamics of the transmission of volatility between India’s stock markets and the countries that provide the majority of its foreign direct investment (FDI), specifically Mauritius, Singapore, the United States, the Netherlands, Japan, the United Kingdom, the United Arab Emirates, Germany and Cyprus. The study has employed EGARCH and DCC-GARCH econometric models, taking into consideration the time period from April 2015 to March 2025. The EGARCH model’s results point to a statistically significant two-way volatility spillover between India and six of its FDI investor nations, alongside a unidirectional volatility spillover observed with three other FDI investor countries. Additionally, for every nation pair examined, the DCC-GARCH model results show the presence of dynamic or time-varying conditional correlations. These findings have important ramifications for academics, portfolio managers, international investors and policymakers in making investment and diversification strategies aiming at return maximization and risk mitigation. This is a unique and innovative work which seeks to find the dynamic volatility transmissions across Indian stock market with its top FDI investor countries, thus making an outstanding contribution to the existing literature.
Ruchika Kaura (Sun,) studied this question.