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Kumar, Arnav
- Sectoral Efficiency of the Indian Stock Market and the Impact of Global Financial Crisis
Authors
1 Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, IN
Source
Journal of Commerce and Accounting Research, Vol 3, No 4 (2014), Pagination: 15-27Abstract
In a first of its kind, this paper examines the issue of sectoral efficiency of the Indian Stock Market. For this, daily data for 11sectoral indices on NSE viz. Auto, Bank, Energy, Finance, FMCG, IT, Media, Metal, Pharma, PSU Banks, and Realty Index have been used. The study period spans from Jan 2004 to Jan 2014 covering a comprehensive 10 years including the recent global financial crisis. The analysis is done using unit ischolar_main tests [Augmented Dickey Fuller (ADF), Phillips-Perron (PP) and Kwiatkowski-Phillips-Schmidt-Shin (KPSS)]and Variance ratio tests [Chow Denning Joint Test, LoMackinlay Test and Wright (2000) Test based on Ranks and Signs].
The results suggest that although overall Indian stock market seems to be weak form efficient, but different sectors comprising it are not, especially during total study period. Further we find evidence of increased inefficiency in Bank, Metal, PSU Bank and Realty sectors in the post-crisis period. This may be due to investor's overreaction in Indian stock market. Tripathi&Aggarwal (2009) have reported that Indian investors tend to overreact to bad news and hence post crisis,the price discovery mechanism was not so efficient. The findings on sectoral efficiency in India have important implications for policy makers, mutual funds, portfolio managers and investors at large. Weak form inefficiency in Bank, Metal, PSU Bank and Realty sectors is suggestive of exploitable arbitrage opportunities in these sectors. The regulators and policy makers must also note that overall market efficiency may not imply efficiency at the sectoral level; for this, more efforts and sector specific reforms need to be taken.
Keywords
Market Efficiency, Sectoral Efficiency, Weak Form Market Efficiency, Indian Stock Market, Variance Ratio Test, JEL Classification: G12, G14.
- Do Macroeconomic Variables Affect Stock Returns in Brics Markets? An ARDL Approach
Authors
1 Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, IN
Source
Journal of Commerce and Accounting Research, Vol 4, No 2 (2015), Pagination: 1-15Abstract
The Arbitrage Pricing Theory (APT) propounded by Ross in 1976 argued for a variety of macroeconomic variables (sources of systematic risk) in explaining stock returns. In the same vein, this paper examines the relationship between macroeconomic variables (GDP, inflation, interest rate, exchange rate, money supply, and oil prices) and aggregate stock returns in BRICS markets over the period 1995-2014 using quarterly data. We have applied Auto Regressive Distributed Lag (ARDL) model to document such a relationship for individual countries as well as for panel data.
Contrary to general belief, we find that GDP and inflation are not found to be significantly affecting stock returns in most of BRICS markets mainly because Stock returns generally tend to lead rather than follow GDP and inflation. In line with the theory and literature, we find significant negative impact of interest rate, exchange rate and oil prices on stock returns and a positive impact of money supply.
This study would be a valuable addition to the growing body of empirical literature on the subject besides being useful to policy makers, regulators and investment community. Policy makers and regulator should watch out for impact of fluctuations in exchange rate, interest rate, money supply, and oil prices on volatility in their stock markets. Investor can search for arbitrage opportunities in BRICS markets on the basis of these variables but not the basis of GDP or inflation.
Keywords
Macroeconomic Variables, Stock Returns, BRICS, Auto Regressive Distributed Lag (ARDL), Panel Analysis.References
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