Variance ratios, structural breaks and nonrandom walk behaviour in the Indian stock returns
AbstractThe paper investigates the issue of behaviour of stock returns in India. A non-parametric variance ratio test is used to examine the issue. Largely the results indicate non-random walk behaviour of Indian stock market. However, the sub-sample analysis of stock returns based on structural breaks show an increasing mean-reverting tendency after occurrence of structural breaks in the series. The events associated with break dates mainly are volatile exchange rate movements, oil shocks, internet bubble burst, sub-prime crisis, global economic meltdown and political uncertainties. Rejection of random walk is relatively stronger for smaller and medium indices than larger indices implying that market capitalization and liquidity play a greater role in improving efficiency of the market.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 48710.
Date of creation: 2012
Date of revision:
Publication status: Published in Journal of Business & Economic Studies 18.2(2012): pp. 62-81
Variance ratio; random walk; market efficiency; mean-reversion; BSE; NSE; Indian stock market.;
Find related papers by JEL classification:
- G0 - Financial Economics - - General
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
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