Factors Affecting Volatility in Indian Stock Market

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Shailja Thakur, Sangeeta

Abstract

This paper aims to provide an overview about main reasons responsible for unpredictability in the performance of stock market of India and the measures taken by government and financial regulatory bodies to control these factors. The stock market provides for mobilization and allocation of savings in an efficient manner. Due to globalization, stock markets play an important role in the development of economies. Various factors increase the level of risk and uncertainty faced by the stock markets due to which stock markets often experience fluctuations. Therefore, measurement of volatility of the stock market returns becomes necessary to decrease this uncertainty. Simply put, volatility is the extent to which the price of the security or asset changes with returns. It measures the level of risk associated with the price fluctuations of a security. Standard deviation of annual returns over a period of time is calculated in order to estimate volatility. Higher the volatility, higher is the risk in security and vice versa. There are number of factors which cause volatility in stock market like rate of inflation, economic crisis, social and political factors, changes in economic policy, economic indicators etc. To control the impact caused by these factors various steps are taken like margin trading, pre open sessions, price bands, circuit breakers etc.

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How to Cite
Shailja Thakur, Sangeeta. (2024). Factors Affecting Volatility in Indian Stock Market. European Economic Letters (EEL), 14(1), 1944–1950. https://doi.org/10.52783/eel.v14i1.1123
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