COVID-19 Pandemic and Indices Volatility: Evidence from GARCH Models

Round 1

Reviewer 1 Report

The reason for the number of lags selected for each model are not explained. Number of lags should be decided based on information criteria analysis. Without analysis of different number of lags using only one lag for each model for each variable is not appropriate.

The test for autocorrelation in standardized residuals should be run after each model to prove that the equations are appropriate and the estimation results are robust.
The paper has some major and minor points which should be considered for improvement.


Major：

The variables have significant shocks for some similar dates. Such shocks should be considered in the model and additional dummy variables should be included to check the impact of those shocks on the estimation results.

It is recommended to test ARCH effect before estimation to prove that the data are appropriate for use in ARCH type models.

Research findings should be compared with findings in other papers and the importance of them should be properly stated in the concluding section.

Different models have different restrictions which should be properly mentioned. All three models should be explained in methodology, not only one.


Minor：

There are many abbreviations in the paper which are not properly explained. All abbreviations should be properly described when first mentioned.

Equations are written with mistakes. The time signs is not properly positioned. Equations for two other models are not given.

The tables have mistakes in titles and explanations. For example it is not clear for the reader the data are returns or levels, logarithmic or non-logarithmic.

Author Response

Respected Editor and Reviewers,

Thank you for reviewing the manuscript and allowing us to incorporate changes into it. The

5 recommendations have helped us in improving the overall quality of the manuscript. Please check the changes incorporated based on the suggestions are described below.

Thank you.

Reviewer #1:

1. Comments: The reason for the number of lags selected for each model are not explained. The number of lags should be decided based on information criteria analysis. Without analysis of different numbers of lags using only one lag for each model for each variable is not appropriate.

 

Response: Lag selection criteria included in the analysis part.

 

2. Comments: The test for autocorrelation in standardized residuals should be run after each model to prove that the equations are appropriate and the estimation results are robust.

Response: Your valuable suggestion will be considered in our future research work.

3. Comments: The variables have significant shocks for some similar dates. Such shocks should be considered in the model and additional dummy variables should be included to check the impact of those shocks on the estimation results.

 

Response: Your valuable suggestion will be considered in our future research work.

 

4. Comments: It is recommended to test ARCH effect before estimation to prove that the data are appropriate for use in ARCH type models.

 

Response: It is clearly discussed in the Section 3.3.1

 

5. Comments: Research findings should be compared with findings in other papers and the importance of them should be properly stated in the concluding section.

 

Response: Comparison included in the Conclusion.

 

6. Comments: Different models have different restrictions which should be properly mentioned. All three models should be explained in methodology, not only one.

 

Response: It is clearly discussed in the Tools Used for Analysis section.

 

Minor：

7. Comments: There are many abbreviations in the paper which are not properly explained. All abbreviations should be properly described when first mentioned.

 

Response: Respected Sir, the suggested changes have been incorporated

 

8. Comments: Equations are written with mistakes. The time signs are not properly positioned. Equations for two other models are not given.

 

Response: The suggested changes have been incorporated into the manuscript.

 

9. Comments: The tables have mistaken in titles and explanations. For example, it is not clear for the reader the data are returns or levels, logarithmic or non-logarithmic.

 

Response: Respected Sir, the changes have been made accordingly.

Reviewer 2 Report

The article should be understandable to the readers. Please explain the abbreviations used. This also applies to "Abstract". The cognitive value of the article would be more excellent if the part concerning the analysis of previous research were extended.

Please consider whether you use American or English spelling. 

Author Response

Respected Editor and Reviewers,

Thank you for reviewing the manuscript and allowing us to incorporate changes into it. The

5 recommendations have helped us in improving the overall quality of the manuscript. Please check the changes incorporated based on the suggestions are described below.

Thank you.

 

1. Comments: The article should be understandable to the readers. Please explain the abbreviations used. This also applies to "Abstract". The cognitive value of the article would be more excellent if the part concerning the analysis of previous research were extended.

 

Response: Respected Sir, the changes have been made accordingly.

Reviewer 3 Report

I have carefully reviewed this manuscript. My comments and suggestions are given below.

 

Comments and Suggestions

1.      Lines 35-36: The authors stated, “in this instance, the following questions arise: How severe and persistent is volatility in the Indian stock market?.................................”. Comment. It is too early to mention the sample country/indices, India. I suggest adding some compelling story that indicates the importance of the Indian market or the benefits of investing in India, and then the authors should focus on the above-stated questions. The flow of the study is not adequate at this point; after describing volatility, the authors should describe some characteristics of the Indian market and why it is important to study.

2.      The scheme of the study should begin from the next line as a new paragraph. The literature is introduced in Section 2. The data and procedures are detailed in Section 3. Section 4 contains the findings and discussion, while Section 5 has the conclusion and policy implications.

3.      Lines 87-90: There are some minor writing errors, which the authors need to correct, such as “A substantial number of models based on the GARCH (1,1) framework have been presented, and it has been noted that the generalized distribution of the residuals of these models is more reliable in measuring the volatility of the series than other residual modelling (Arumugam et al., 2013; Shankar et al., 2014; Kim et al., 2019)”. Similarly, Islam et al, 2013 (Line 93).

4.      Lines 105-106: The authors stated, “this study uses the event study methodology ……… to the arrival of COVID-19 in Chile”. Comment: In Chile or India?

5.      Why is Section 3 labeled as Background of the Study? I believe it is the Data and Methodology section.

6.      The authors stated that “there are few studies analysing the change in the spillover effect in the Indian stock market as a result of the COVID-19 pandemic, although many research papers concentrated on capturing financial market spillover effects, downside risk-return spillovers, and their effects on market volatility (Lines 113-116). Comment: The authors cited no such study. Among others, the authors can cite the following study (Ali et al., 2023): https://doi.org/10.1016/j.pacfin.2023.102044.

7.      There are numerous typos and trivial writing errors. For example, “T” of “Three” is unnecessarily capitalized in this sentence (Lines 123-125): “Furthermore, the sample size is divided into Three parts where pre-COVID analysis, during-COVID analysis and post-COVID analysis.”

8.      The heading of Section 3.1 “Used Data” seems awkward. Moreover, there are so many subheadings in Section 3.2. Please fix them.

9.      Likewise, revise table titles; they are not convincing. Also, add notes to tables.

10.   Add some literature support to Covid subperiods. Why does the Covid period vary between January 1, 2020, and December 31, 2021, whereas the post-Covid period begins from January 1, 2022? Any specific reason? For instance, Ülkü et al. (2023), among others, ended the Covid period in November 2020. https://doi.org/10.1016/j.pacfin.2023.102044. Please discuss the rationale behind the sample period selection. At present, it seems arbitrary. Moreover, in the financial economics literature, 2022 is more associated with the Russia-Ukraine war than the post-Covid period.

11.   Similarly, there are numerous GARCH models. Most studies first test several versions of the GARCH-family models before selecting the final one. Such as, GJR-AR-GARCH, E-GARCH, and GARCH (p,q). Then, based on AIC or BIC criteria, they pick the most suitable model. The authors should shed light on the selection of the model.

12.   Tables should appear after they are discussed in the main text.

13.   Please compare your findings with other international and India-specific studies. The discussion of the results should be critical, not only statistical.

14.   Add limitations of the study and future research direction in the conclusion section.

 

There are some typos. Need a good proofread. 

Author Response

Respected Editor and Reviewers,

Thank you for reviewing the manuscript and allowing us to incorporate changes into it. The

5 recommendations have helped us in improving the overall quality of the manuscript. Please check the changes incorporated based on the suggestions are described below.

Thank you.

 

1. Comments: Lines 35-36: The authors stated, “in this instance, the following questions arise: How severe and persistent is volatility in the Indian stock market?.................................”. It is too early to mention the sample country/indices, India. I suggest adding some compelling story that indicates the importance of the Indian market or the benefits of investing in India, and then the authors should focus on the above-stated questions. The flow of the study is not adequate at this point; after describing volatility, the authors should describe some characteristics of the Indian market and why it is important to study.

 

Response: Respected Sir, thank you for the suggestions. As suggested, the changes have been incorporated.

 

2. Comments: The scheme of the study should begin from the next line as a new paragraph. The literature is introduced in Section 2. The data and procedures are detailed in Section 3. Section 4 contains the findings and discussion, while Section 5 has the conclusion and policy implications.

 

Response: Respected Sir, the changes have been incorporated.

 

3. Comments: Lines 87-90: There are some minor writing errors, which the authors need to correct, such as “A substantial number of models based on the GARCH (1,1) framework have been presented, and it has been noted that the generalized distribution of the residuals of these models is more reliable in measuring the volatility of the series than other residual modelling (Arumugam et al., 2013; Shankar et al., 2014; Kim et al., 2019)”. Similarly, Islam et al, 2013 (Line 93).

 

Response: The suggested changes have been incorporated into the manuscript.

 

4. Comments:Lines 105-106: The authors stated, “this study uses the event study methodology ……… to the arrival of COVID-19 in Chile”. Comment: In Chile or India?

Response: Respected Sir, as suggested the changes have been incorporated in the methodology.

 

5. Comments: Why is Section 3 labelled as Background of the Study? I believe it is the Data and Methodology

 

Response: Respected Sir, thank you for the suggestions. As suggested, the changes have been incorporated into the manuscript.

 

6. Comments: The authors stated that “there are few studies analysing the change in the spillover effect in the Indian stock market as a result of the COVID-19 pandemic, although many research papers concentrated on capturing financial market spillover effects, downside risk-return spillovers, and their effects on market volatility(Lines 113-116). Comment: The authors cited no such study. Among others, the authors can cite the following study (Ali et al., 2023): https://doi.org/10.1016/j.pacfin.2023.102044.

 

Response:

 

7. Comments: There are numerous typos and trivial writing errors. For example, “T” of “Three” is unnecessarily capitalized in this sentence (Lines 123-125): “Furthermore, the sample size is divided into Three parts where pre-COVID analysis, during-COVID analysis and post-COVID analysis.”

 

Response: Respected Sir, as suggested the spelling and the grammatical errors have been corrected.

 

 

8. Comments: The heading of Section 3.1 “Used Data” seems awkward. Moreover, there are so many subheadings in Section 3.2. Please fix them.

 

Response: Respected Sir, thank you for the suggestion. The suggested changes have been incorporated into the manuscript.

 

9. Comments:Likewise, revise table titles; they are not convincing. Also, add notes to tables.

 

Response: Respected Sir, thank you for the suggestion. The table titles have been incorporated into the manuscript

 

10. Comments: Add some literature support to Covid subperiods. Why does the Covid period vary between January 1, 2020, and December 31, 2021, whereas the post-Covid period begins from January 1, 2022? Any specific reason? For instance, Ülkü et al. (2023), among others, ended the Covid period in November 2020. https://doi.org/10.1016/j.pacfin.2023.102044. Please discuss the rationale behind the sample period selection. At present, it seems arbitrary. Moreover, in the financial economics literature, 2022 is more associated with the Russia-Ukraine war than the post-Covid period.

Response: The suggested changes have been incorporated into the manuscript.

 

11. Comments: Similarly, there are numerous GARCH models. Most studies first test several versions of the GARCH-family models before selecting the final one. Such as, GJR-AR-GARCH, E-GARCH, and GARCH (p,q). Then, based on AIC or BIC criteria, they pick the most suitable model. The authors should shed light on the selection of the model.

 

Response: Respected Sir, the changes have been made accordingly.

 

12. Comments: Tables should appear after they are discussed in the main text.

 

Response: Respected Sir, thank you for the suggestions. As suggested, the changes have been incorporated.

 

13. Comments: Please compare your findings with other international and India-specific studies. The discussion of the results should be critical, not only statistical.

 

Response: As suggested, the comparison of finding have been added into the manuscript

 

14. Comments: Add limitations of the study and future research direction in the conclusion section.

 

Response: As suggested, the limitations of the study have been added into the manuscript.

Round 2

Reviewer 1 Report

The revised version of the paper is improved well. Many suggestions are taken into consideration by the author. However, one major suggestion is skipped. To prove the appropriateness of the model equations, after estimating each equation there should be a test for autocorrelation in residuals. For that, after estimation of each equation, residuals should be predicted and the predicted residuals should be checked for autocorrelation (using LM test). Alternative tests are also gods if any. It is very important for showing the fact that the core part of your paper - your estimation equation are not misspecified and the estimation results are robust. I do not want to increase the author’s burden, but this test will increase the academic value of the paper.

Author Response

Respected Editor and Reviewer,

Thank you for reviewing the manuscript and allowing us to incorporate changes into it. The

recommendations have helped us in improving the overall quality of the manuscript. Please check the changes incorporated based on the suggestions described below.

Thank you.

Reviewer #1:

1. Comments: The revised version of the paper is improved well. Many suggestions are taken into consideration by the author. However, one major suggestion is skipped. To prove the appropriateness of the model equations, after estimating each equation there should be a test for autocorrelation in residuals. For that, after the estimation of each equation, residuals should be predicted and the predicted residuals should be checked for autocorrelation (using the LM test). Alternative tests are also good if any. It is very important to show the fact that the core part of your paper - your estimation equation is not mis-specified and the estimation results are robust. I do not want to increase the author’s burden, but this test will increase the academic value of the paper.

 

Response: As suggested, the LM test has been added into the manuscript. (Page No. 7, Highlighted with Green).

Author Response File: Author Response.doc

Reviewer 3 Report

 While the authors have incorporated some suggestions I made, there are still some issues with the manuscript. 

(i) First, the contribution of the study is missing in the introduction section. The authors should explain what areas of the extant literature this study extends.

(ii) Figures are not appropriately numbered or presented, such as 4.5 and 4.6 etc. The figures and table should be numbered and presented following the journal's format. I did not find Figure 1, Figure 2 and so on. Similarly, Figure captions should be presented below the figure, not above the figure.

(iii) Add notes to tables and figures. For example, Table 1 should illustrate the selected indices, the sample period, and the frequency of the data, among other important information required to understand the numbers presented in the table.

(iv) Figures should illustrate x- and y-axis. Add notes and headers on the axis, indicating the data x-axis and y-axis in the figure.

(v) Restructure the first paragraph of Section 4. It is not scientific to write about the following subsections.

(vi) The discussion, conclusion, and limitation sections are very precise and small. Altogether, less than 1000 words. The authors should find a way to restructure these three sections (5-7). Limitations can be added at the end of the conclusion before writing the future research agenda—no need to add a separate section.

(v) Newly added studies are not added to the “References” section.

Overall, the authors should consider this revision seriously to avoid the rejection of the manuscript. Please carefully proofread the manuscript and improve its quality and presentation in all aspects. Good luck!

 

Need careful proofread. There are places where structure of writing must be improved. 

Author Response

Respected Editor and Reviewer,

Thank you for reviewing the manuscript and allowing us to incorporate changes into it. The

recommendations have helped us in improving the overall quality of the manuscript. Please check the changes incorporated based on the suggestions described below.

Thank you.

 

1. Comments: First, the contribution of the study is missing in the introduction section. The authors should explain what areas of the extant literature this study extends.

 

Response: Respected Sir, thank you for the suggestions. As suggested, the changes have been incorporated into the manuscript (Page No. 2&3) Highlighted with Yellow

 

2. Comments: Figures are not appropriately numbered or presented, such as 4.5 and 4.6 etc. The figures and table should be numbered and presented following the journal's format. I did not find Figure 1, Figure 2, and so on. Similarly, Figure captions should be presented below the figure, not above the figure.

 

Response: Kindly see Page No. 10, 12 and 14

 

3. Comments: Add notes to tables and figures. For example, Table 1 should illustrate the selected indices, the sample period, and the frequency of the data, among other important information required to understand the numbers presented in the table.

 

Response: Respected Sir, as suggested notes have been included.

 

4. Comments: Figures should illustrate x- and y-axis. Add notes and headers on the axis, indicating the data x-axis and y-axis in the figure.

 

Response: Kindly see Page No. 10, 12 and 14

 

 

5. Comments: Restructure the first paragraph of Section 4. It is not scientific to write about the following subsections.

 

Response: Section 4 has been reframed.

 

6. Comments: The discussion, conclusion, and limitation sections are very precise and small. Altogether, less than 1000 words. The authors should find a way to restructure these three sections (5-7). Limitations can be added at the end of the conclusion before writing the future research agenda—no need to add a separate section.

 

Response: Respected Sir, the changes have been made accordingly

 

 

7. Comments: Newly added studies are not added to the “References” section.

 

Response: Respected Sir, the suggested changes have been incorporated

 

Author Response File: Author Response.doc

Round 3

Reviewer 1 Report

The revised version is enough improved.

The format of some data in some tables seems different and should be adjusted.

Author Response

Respected Editor and Reviewer,

Thank you for reviewing the manuscript and allowing us to incorporate changes into it. The

recommendations have helped us in improving the overall quality of the manuscript. Please check the changes incorporated based on the suggestions described below.

Thank you.

Reviewer #1:

Comments: The format of some data in some tables seems different and should be adjusted.

Response: Respected Sir, thank you for the suggestions. As suggested, the changes have been incorporated.

Reviewer 3 Report

I have no more comments. I believe, my earlier comments, specifically related to exposition of the manuscript are not well addressed. The manuscript needs to be very carefully proofread by some experts. 

 

There is an extensive use of colloquial language. 

Author Response

Respected Editor and Reviewers,

Thank you for reviewing the manuscript and allowing us to incorporate changes into it. The recommendations have helped us in improving the overall quality of the manuscript. Please check the changes incorporated based on the suggestions described below.

Thank you.

Comments: I have no more comments. I believe, my earlier comments, specifically related to exposition of the manuscript are not well addressed. The manuscript needs to be very carefully proofread by some experts. 

Response: Respected Sir, thank you for giving to opportunity to address the comments and incorporating the changes in the manuscript. As suggested, efforts have been made to improve the language, and the colloquial language have been removed, and errors have been corrected.

 

Round 4

Reviewer 3 Report

The manuscript can be accepted for publication. 

Need proofread and corrections.