This article undertakes the analysis of volatility and volatility spillover between stock market and currency market in India. Daily closing levels of the benchmark indices are taken for the period 1 April 2003–31 December 2013. The data are analysed through unit root tests, Autoregressive Conditionally Heteroskedastic (ARCH) family models, Johansen’s cointergation test, vector error correction model and diagonal Vector Error Correction Heteroskedastic (VECH) model. The results indicate a bidirectional volatility spillover between the Indian stock market and a currency market. The findings of the study also suggest that both the markets move in tandem with each other and there is a long-run relationship between these two markets.
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