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The Behavior of Extreme and Cumulative Stock Price Random Variables during the Crisis Periods-A Study of Nifty 50 Stocks

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  • Srilakshminarayana Gali

    (SDM Institute for Management Development, Mysore, India)

Abstract

In this paper, we attempt to identify the probability structure of extreme and cumulative stock price random variables for the Nifty 50 stocks, during six time periods between 2007 and 2020, where the major financial crises have occurred. We estimate the tail index for each stock to identify the corresponding probability model for extreme stock prices (minimum and maximum) and the domain for the cumulative stock prices. From our analysis, we found Weibull distribution as an appropriate model that fits the extremes for many stocks during the periods and for other stocks, Fréchet and Gumbel distributions form the domains. Similarly found that the domain of cumulative stock price oscillates between normal and stable. Interestingly, for many stocks normal remained to be the domain during the periods. We present a table towards the end that gives the classification of the stocks, based on the number of times the domain changes from normal to stable, as Highly affected, moderately affected, and low affected stocks. This can be considered by the decision-makers while concluding on these stocks.

Suggested Citation

  • Srilakshminarayana Gali, 2021. "The Behavior of Extreme and Cumulative Stock Price Random Variables during the Crisis Periods-A Study of Nifty 50 Stocks," Economic Research Guardian, Weissberg Publishing, vol. 11(1), pages 103-129, June.
    • Handle: RePEc:wei:journl:v:11:y:2021:i:1:p:103-129
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cumulative and Extreme prices; Financial Crises; Normal domain; Stable domain; Tail index;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C89 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other
    • G00 - Financial Economics - - General - - - General

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