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S&P BSE Sensex and S&P BSE IT return forecasting using ARIMA

Author

Listed:
  • Madhavi Latha Challa

    (CMR College of Engineering & Technology)

  • Venkataramanaiah Malepati

    (SG Govt. Degree & PG College)

  • Siva Nageswara Rao Kolusu

    (Department of Management Studies, Vignan Foundation for Science, Technology & Research)

Abstract

This study forecasts the return and volatility dynamics of S&P BSE Sensex and S&P BSE IT indices of the Bombay Stock Exchange. To achieve the objectives, the study uses descriptive statistics; tests including variance ratio, Augmented Dickey-Fuller, Phillips-Perron, and Kwiatkowski Phillips Schmidt and Shin; and Autoregressive Integrated Moving Average (ARIMA). The analysis forecasts daily stock returns for the S&P BSE Sensex and S&P BSE IT time series, using the ARIMA model. The results reveal that the mean returns of both indices are positive but near zero. This is indicative of a regressive tendency in the long-term. The forecasted values of S&P BSE Sensex and S&P BSE IT are almost equal to their actual values, with few deviations. Hence, the ARIMA model is capable of predicting medium- or long-term horizons using historical values of S&P BSE Sensex and S&P BSE IT.

Suggested Citation

  • Madhavi Latha Challa & Venkataramanaiah Malepati & Siva Nageswara Rao Kolusu, 2020. "S&P BSE Sensex and S&P BSE IT return forecasting using ARIMA," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-19, December.
    • Handle: RePEc:spr:fininn:v:6:y:2020:i:1:d:10.1186_s40854-020-00201-5
    DOI: 10.1186/s40854-020-00201-5
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