Vol. 6, Issue 1, Part C (2024)

This paper investigated the relationship between stock returns and volatility in India using the E-GARCH-in-mean model in light of banking reforms, insurance reform, the stock market crash, and the global financial crisis. Using daily returns over the period of 4 January 2004 to January 4, 2009, Volatility persistence, asymmetric properties, and risk-return relationship are investigated for the Indian stock market. The result also shows that volatility is persistent and there is a leverage effect supporting the work of Nelson (1991). The study found little evidence of the relationship between stock returns and risk as measured by its own volatility. The study found a positive but insignificant relationship between stock return and risk. The result shows that banking reform and stock market crash negatively impact stock returns while insurance reform and the global financial crisis have no impact on stock returns. The stock market volatility is also found to have accounted for the sudden change in variance.