Understanding Investors’ Behavior under Market Volatility: Evidence from the Equity Market
1 Miss Jyotiben I. Ghanchi , 2Miss Bhavna S. Jadav, 3Dr. Nimesh P. Bhojak
1,2 Research Scholar (Management), Hemchandracharya North Gujarat University, Patan, Gujarat, India. jyotighanchi@gmail.com jadavbhavna26@gmail.com
3 Assistant professor, Hemchandracharya North Gujarat University, Patan, Gujarat, India, nimeshbhojak@outlook.com
Abstract
The study examines investor behaviour in the Indian equity market under varying market volatility conditions using a quantitative time-series framework. Monthly secondary data covering the period from January 2015 to January 2025 are analysed to capture both stable and turbulent market phases. Market volatility is measured using the India VIX, while investor behaviour is proxied by trading volume of the NIFTY 50 index, with market returns included as a control variable. Descriptive statistics, Pearson correlation analysis, multiple regression models, and regime-based analysis are employed to investigate the relationship between volatility and investor activity. The results reveal substantial variability in market volatility over time, with pronounced spikes during periods of market stress. Correlation analysis indicates a strong positive association between volatility and trading volume, suggesting heightened investor activity during uncertain market conditions, while volatility is negatively related to market returns. Regression results confirm that market volatility has a statistically significant and positive impact on trading volume even after controlling for returns. Further, regime analysis shows that trading activity increases disproportionately during high-volatility periods, with statistically significant differences between high- and low-volatility regimes. These findings highlight asymmetric investor responses during extreme market conditions and provide evidence of behavioral biases such as risk aversion and herding. The study contributes to behavioral finance literature by offering empirical insights from an emerging market context and has implications for investors and policymakers concerned with market stability.
Keywords: Market Volatility, Investor Behaviour, Equity Market, Volatility Index (VIX), Behavioral Finance
