Implied Volatility and Equity Market Segmentation: Evidence on Volatility Spillovers in India Using Hybrid Deep Learning Models

Abstract

Periods of heightened uncertainty have become increasingly frequent in modern financial markets, intensifying the need for forward-looking measures that can anticipate volatility rather than merely describe it ex post. Implied volatility indices have emerged as prominent proxies for market fear, yet empirical evidence on how such fear propagates across different segments of equity markets remains limited, particularly in emerging economies. Against this backdrop, the present study examines whether India VIX functions as a leading indicator of volatility spillovers across Indian equity market capitalization tiers and whether such spillovers are heterogeneous and regime-dependent.