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Are there Benefits from Sectoral Diversification in the Indian BSE Market? Evidence from Non-Parametric Test

Author

Listed:
  • TIWARI, AVIRAL KUMAR

    (ICFAI University, Tripura)

  • ISLAM, FARIDUL

    (Morgan State University, Baltimore)

Abstract

This paper tests the weak form of stock market efficiency using data on eight sectoral indices from the Bombay Stock Exchange (BSE, India). The aim is to examine if portfolio diversification strategy can be used by investors to make financial gains. For this purpose we implement the Breitung’s (2002) non-parametric unit root test and the Bierens’s (1997) and Breitung’s (2002) non-parametric cointegration test. Based on the results, we find that the BSE sectoral indices satisfy the weaker form of efficiency. The cointegration tests suggest that there is no common trend which can bring these BSE indices together in the long run. This implies that the benefits of diversification are enormous within these indices.

Suggested Citation

  • Tiwari, Aviral Kumar & Islam, Faridul, 2012. "Are there Benefits from Sectoral Diversification in the Indian BSE Market? Evidence from Non-Parametric Test," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 47(2), pages 285-306.
    • Handle: RePEc:dse:indecr:0057
    as

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    More about this item

    Keywords

    Bombay Stock Indices; India; Structural Breaks; Non-parametric Cointegration Test;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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