IDEAS home Printed from https://ideas.repec.org/a/wly/ijfiec/v28y2023i3p2989-2997.html
   My bibliography  Save this article

Power of moment‐based normality tests: Empirical analysis on Indian stock market index

Author

Listed:
  • Muneer Shaik
  • Rutvik Digambar Gulhane

Abstract

In this paper, we study the power of moment‐based normality tests which include Jarque Bera (JB) test and D′Agostino and Pearson (DP) omnibus tests. Power comparison were obtained via Monte Carlo simulation of sample data generated from four alternative distributions like Uniform, Logistic, Student t and Gamma distribution. Our simulation results show that for Uniform distribution, DP test has better power compared to JB test. For Logistic, Student t and Gamma distributions, we find JB normality test to be powerful compared to DP test. We further apply the moment‐based normality tests empirically on the Indian stock market indices (NSE Nifty 50 and BSE Sensex) for different frequencies (daily, weekly, monthly and quarterly) during the period from 2010 to 2020. We find that daily returns of Indian stock indices are non‐normal whereas weekly, monthly and quarterly returns are normally distributed.

Suggested Citation

  • Muneer Shaik & Rutvik Digambar Gulhane, 2023. "Power of moment‐based normality tests: Empirical analysis on Indian stock market index," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2989-2997, July.
    • Handle: RePEc:wly:ijfiec:v:28:y:2023:i:3:p:2989-2997
    DOI: 10.1002/ijfe.2579
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/ijfe.2579
    Download Restriction: no
    File URL: https://libkey.io/10.1002/ijfe.2579?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, May.
    2. Parameswaran Gopikrishnan & Vasiliki Plerou & Luis A. Nunes Amaral & Martin Meyer & H. Eugene Stanley, 1999. "Scaling of the distribution of fluctuations of financial market indices," Papers cond-mat/9905305, arXiv.org.
    3. Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Zhimin & Ibragimov, Rustam, 2019. "One country, two systems? The heavy-tailedness of Chinese A- and H- share markets," Emerging Markets Review, Elsevier, vol. 38(C), pages 115-141.
    2. Andrew Balthrop, 2016. "Power laws in oil and natural gas production," Empirical Economics, Springer, vol. 51(4), pages 1521-1539, December.
    3. Einmahl, John & He, Y., 2020. "Unified Extreme Value Estimation for Heterogeneous Data," Other publications TiSEM dfe6c38c-823b-4394-b4fd-a, Tilburg University, School of Economics and Management.
    4. Anirban Chakraborti & Ioane Muni Toke & Marco Patriarca & Frederic Abergel, 2011. "Econophysics review: I. Empirical facts," Quantitative Finance, Taylor & Francis Journals, vol. 11(7), pages 991-1012.
    5. Behfar, Stefan Kambiz, 2016. "Long memory behavior of returns after intraday financial jumps," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 461(C), pages 716-725.
    6. Malhotra, Gifty & Srivastava, R. & Taneja, H.C., 2019. "Calibration of the risk-neutral density function by maximization of a two-parameter entropy," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 513(C), pages 45-54.
    7. Jovanovic, Franck & Schinckus, Christophe, 2017. "Econophysics and Financial Economics: An Emerging Dialogue," OUP Catalogue, Oxford University Press, number 9780190205034, Decembrie.
    8. Warusawitharana, Missaka, 2018. "Time-varying volatility and the power law distribution of stock returns," Journal of Empirical Finance, Elsevier, vol. 49(C), pages 123-141.
    9. Einmahl, John & He, Y., 2020. "Unified Extreme Value Estimation for Heterogeneous Data," Discussion Paper 2020-025, Tilburg University, Center for Economic Research.
    10. Grobys, Klaus, 2023. "A multifractal model of asset (in)variances," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).
    11. Ouandlous, Arav & Barkoulas, John T. & Pantos, Themis D., 2022. "Extremity in bitcoin market activity," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    12. Federica De Domenico & Giacomo Livan & Guido Montagna & Oreste Nicrosini, 2023. "Modeling and Simulation of Financial Returns under Non-Gaussian Distributions," Papers 2302.02769, arXiv.org.
    13. Anirban Chakraborti & Ioane Muni Toke & Marco Patriarca & Frédéric Abergel, 2011. "Econophysics review: I. Empirical facts," Post-Print hal-00621058, HAL.
    14. Stjepan Beguv{s}i'c & Zvonko Kostanjv{c}ar & H. Eugene Stanley & Boris Podobnik, 2018. "Scaling properties of extreme price fluctuations in Bitcoin markets," Papers 1803.08405, arXiv.org.
    15. Blackwell, Calvin, 2018. "Power Laws in Real Estate Prices? Some Evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 69(C), pages 90-98.
    16. Hanousek, Jan & Novotný, Jan, 2012. "Price jumps in Visegrad-country stock markets: An empirical analysis," Emerging Markets Review, Elsevier, vol. 13(2), pages 184-201.
    17. Begušić, Stjepan & Kostanjčar, Zvonko & Eugene Stanley, H. & Podobnik, Boris, 2018. "Scaling properties of extreme price fluctuations in Bitcoin markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 510(C), pages 400-406.
    18. Federico Botta & Helen Susannah Moat & H Eugene Stanley & Tobias Preis, 2015. "Quantifying Stock Return Distributions in Financial Markets," PLOS ONE, Public Library of Science, vol. 10(9), pages 1-10, September.
    19. Grobys, Klaus, 2021. "What do we know about the second moment of financial markets?," International Review of Financial Analysis, Elsevier, vol. 78(C).
    20. Jakub W. Jurek & Erik Stafford, 2011. "The Cost of Capital for Alternative Investments," Harvard Business School Working Papers 12-013, Harvard Business School.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:ijfiec:v:28:y:2023:i:3:p:2989-2997. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/1076-9307/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.