Is There Long Memory in Indian Stock Market Returns? An Empirical Search

Journal of Asia-Pacific Business, Vol. 16(2), p. 128-145, 2015 DOI: 10.1080/10599231.2015.1028306

Posted: 27 Jun 2017

See all articles by Gourishankar S. Hiremath

Gourishankar S. Hiremath

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

Jyoti Kumari

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

Date Written: May 9, 2015

Abstract

The issue of long memory, though has important theoretical and practical implications, has not received much attention in India. This article examines the issue of long memory in mean of the stock returns by employing a set of sophisticated time-series tests including a bias reduced log periodogram test of Andrews and Guggenberger. The study used daily values of 29 major indices including sectoral indices traded on the National Stock Exchange and Bombay Stock Exchange from April 2003 to March 2012, which provide insights into relation between composition of indices and long memory. The findings of the study suggest significant presence of long memory in mean returns of the medium- and small-sized indices and weaker evidences for large cap indices.

Further, the study identifies a relationship between presence of long memory and market structure variables. The use of linear models in the presence of long memory would result in incorrect inferences, and this calls for investigation of appropriate long memory model to generate profits in Indian stock market.

Keywords: Long Memory, Fractional Integration, Random Walk, Market Efficiency, Indian Stock Market, NSE, BSE

JEL Classification: G14, C1, C22

Suggested Citation

Hiremath, Gourishankar S. and Kumari, Jyoti, Is There Long Memory in Indian Stock Market Returns? An Empirical Search (May 9, 2015). Journal of Asia-Pacific Business, Vol. 16(2), p. 128-145, 2015 DOI: 10.1080/10599231.2015.1028306, Available at SSRN: https://ssrn.com/abstract=2604433

Gourishankar S. Hiremath (Contact Author)

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

Kharagpur, West Bengal 721302
India

Jyoti Kumari

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

Kharagpur, West Bengal 721302
India

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