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Day-of-the-Week
Effect and Market Efficiency-Evidence from Indian Equity Market
Using High Frequency Data of National Stock Exchange
--
Golaka C Nath and Manoj Dalvi
The
present study examines empirically the day-of-the-week effect
anomaly in the Indian equity market for the period 1999 to
2003 using both high frequency and end-of-day data for the
benchmark Indian equity market index S&P CNX NIFTY. Using
robust regression with biweights and dummy variables, the
study finds that before the introduction of rolling settlement
in January 2002, Monday and Friday were significant days.
However, after the introduction of the rolling settlement,
Friday has become significant. This also indicates that Fridays,
being the last day of the week, have become significant after
rolling settlement. Mondays were found to have higher standard
deviations followed by Fridays. The existence of market inefficiency
is clear. The market inefficiency still exists and market
is yet to price the risk appropriately.
© 2005 The IUP Journal of APPLIED FINANCE.
Testing
of Stock Price Behavior in Indian Markets: An Application
of Variance Ratio Test and ARIMA Modeling
--
Raj S Dhankar and Madhumita Chakraborty
This
study investigates the stock price behavior of Indian stock
markets using BSE Sensex as well as 30 individual underlying
shares included in the Sensex. Variance Ratio test for the
market index suggests dependency of the aggregate market series,
which violates the assumption of Random Walk Hypothesis (RWH).
However, the test results manifest mixed behavior of return
generating process for individual companies. Sixteen companies
have been found to show dependence while the remaining 14
companies could be described by the RWH. The study has also
developed one forecasting model for the market index using
the ARIMA process. The AR(9) model has been found to be an
appropriate model for forecasting future returns to the Sensex,
the validity of which is ofcourse, subject to real-world experiments.
© 2005 The IUP Journal of APPLIED FINANCE.
Spectral
Analysis of Stock Prices in India: An Empirical Application
-- Pratap Chandra Biswal and
B Kamaiah
This
paper has applied spectral analysis to reveal possible cyclical
components in the Indian stock returns series. For power spectrum
analysis, the study used daily data of four broad-based market
indices viz., BSE Sensitive Index, BSE National Index, NSE
S&P CNX 500 Index and NSE S&P CNX Nifty Index during
the period from January 1991 to December 2001. The univariate
spectra (power spectrum) for the four returns series suggest
that there are no significant cyclical patterns present in
four stock price indices. Apart from that, the study has considered
three major developed stock markets indices for cross-spectrum
analysis, viz., Dow Jones Industrial Average (DJIA) of the
US, FTSE 100 index of the UK, and Nikkei 225 of Japan, spanning
over the period from January 2000 through December 2001. The
cross-spectrum analysis suggests that there are no similar
long-term development features between India and developed
stock markets studied here.
© 2005 The IUP Journal of APPLIED FINANCE.
Random
and Non-random Walks on the South Asian Stock Markets
-- Kian-Ping Lim
The
main objective of this study is to address the question whether
stock prices follow random walk all the time. Using the sample
of three South Asian stock market indices, coupled with the
powerful Hinich and Patterson (1995) windowed testing procedure,
the results show that all the series under study move in a
significantly non-random and dependent pattern for brief periods
of time, while for the remaining majority of sub-periods the
market moves along at a close approximation to a random walk.
Hence, with the present findings, these three South Asian
stock markets join the growing list of exchanges that at times
move randomly and at other times may not. In addition to that,
several important implications drawn from the findings are
also provided in the paper.
© 2005 The IUP Journal of APPLIED FINANCE.
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