BSE SME Equity Financing Platform: A study of Index Risk-Return Paradox

The study attempts to introduce an innovative initiative of the BSE's SME equity financing segment and explore the time varying risk-return relationship of the BSE SME IPO index by employing GARCH-M, TGARCH-M, EGARCH-M and Asymmetric CGARCH models. The results spotlight the existence of a positive risk-return relationship between short run volatility component and the actual returns, whereas a negative relationship has been observed between the long run volatility and index returns. The results reported by the GARCH-M, EGARCH-M and TGARCH-M model in the context of the BSE SME IPO index shows insignificant, but a positive relationship between the risk and return. A positive shock has a more pronounced impact on volatility in case of the BSE SME IPO segment. A study relating to the relationship between the index risk and returns is an imperative task to be performed by the existing and prospective investors.