Empirical investigation of relationship between equity ETF and stock index: Study of Indian market

Abstract

The synergy between the index volatility and equity ETFs have attracted the analysts due to their increase in utility as investment vehicle. The current study aims to investigate the association between the equity ETF and index volatility. The daily data from 1st January 2021 to 31st December 2022 has been taken for the current study. The percentage change in volume traded of ETF has been calculated. The volatility of Sensex has been calculated by generating GARCH variance series in E-views. Before applying GARCH, the condition of ARCH has been estimated. Pearson correlation coefficient has been performed on SPSS. The result of the study indicates a positive correlation between he understudy variables. The results have been supported by previous studies. It signifies that with increase in volatility in Stock index, the fluctuation in ETF trade volume is also increased.