Hedging Dynamics and Intraday Volatility in Equity Market: An Analysis of Covid-19 Pandemic and Global Financial Crisis

We examine intraday volatility spillover and interdependence between spot and futuresin different market conditions over two major events - covid-19 and 2008-09 global financial crisisand assess the evolution of hedging dynamics. Our findings indicate distinct differences and similarities in both the crises. During covid-19, we find evidence of increased symmetry in own-market volatility, decreased duration of bear phase and swift recovery to pre-crisis levels. In both 2008-09 crisis and covid-19 period, we findi) strong interconnectedness between spot and futures volatility spillover effect and the intensity varies widely across up and down trends ii) cross-marketvolatility spillover and correlation from futures to spot is relatively higherand provides stronger hedging opportunities during downtrends. The GARCH-BEKK findings demonstrate the importance of market condition-based time varying covariance estimations.