Some Further Evidence on Behaviour of Stock Returns in India

International Journal of Economics and Finance, Vol. 2, No. 2, May 2010

11 Pages Posted: 7 Mar 2011

See all articles by Gourishankar S. Hiremath

Gourishankar S. Hiremath

Indian Institute of Technology (IIT), Kharagpur - Department of Humanities and Social Sciences

Bandi Kamaiah

University of Hyderabad

Date Written: May 1, 2010

Abstract

This paper examines the stock return behaviour in two premier Indian stock markets using Chow-Denning multiple variance ratio and Hinich bicorrelation tests. The former test overcomes size distortion of conventional variance ratio test. The latter test is capable of detecting linear and non-linear dependencies. The study is based on 14 indices relating to the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), and relates to the period 02/06/1997 to 0/01/2009. The Chow-Denning test rejects the null of random walk for six indices. The Hinich test rejects the null of pure white noise for full sample period. However, the windowed test results of Hinich show that the serial dependencies are not consistent across the sample period for all indices. This indicates presence of episodic dependencies in stock returns surrounded by long periods of pure noise.

Keywords: Random walk, Serial dependence, Variance ratios, Bi-correlation, Episodic dependencies, NSE, BSE, Nifty, Sensex, Indian Stock Market

JEL Classification: G14, C14, C58

Suggested Citation

Hiremath, Gourishankar S. and Kamaiah, Bandi, Some Further Evidence on Behaviour of Stock Returns in India (May 1, 2010). International Journal of Economics and Finance, Vol. 2, No. 2, May 2010, Available at SSRN: https://ssrn.com/abstract=1776967

Gourishankar S. Hiremath (Contact Author)

Indian Institute of Technology (IIT), Kharagpur - Department of Humanities and Social Sciences ( email )

Kharagpur, West Bengal 721302
India

Bandi Kamaiah

University of Hyderabad ( email )

Central University (PO)
Andhra Pradesh
Hyderabad, CA 500 046
India

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