Market Capitalization, Cross Correlations, the Lead/Lag Structure and Microstructure Effects in the Indian Stock Market

24 Pages Posted: 20 Jun 2002

See all articles by Sunil S. Poshakwale

Sunil S. Poshakwale

Cranfield University - School of Management

Michael Theobald

University of Birmingham - Department of Accounting and Finance

Date Written: March 2002

Abstract

The lead/lag relationship between large and small cap firms is investigated by using a number of Indian equity index series that differ in their market capitalisation characteristics. Large cap indices are found to lead small cap indices and to have higher speeds of adjustment towards intrinsic values. Pure thin trading effects and a thin trading/adjustment interaction effect are found to make significant contributions to the lead/lag effect. The intrinsic value processes themselves, are found to be characterised by a small degree of overreaction.

Suggested Citation

Poshakwale, Sunil S. and Theobald, Michael F., Market Capitalization, Cross Correlations, the Lead/Lag Structure and Microstructure Effects in the Indian Stock Market (March 2002). EFMA 2002 London Meetings. Available at SSRN: https://ssrn.com/abstract=314862 or http://dx.doi.org/10.2139/ssrn.314862

Sunil S. Poshakwale (Contact Author)

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom

Michael F. Theobald

University of Birmingham - Department of Accounting and Finance ( email )

Birmingham B15 2TT
United Kingdom
0121 414 6678 (Fax)

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