Artha Vijnana: Journal of The Gokhale Institute of Politics and Economics

Gourishankar S. Hiremath ¹, Bandi Kamaiah ²

Affiliations
1 Gokhale Institute of Politics and Economics, BMCC Road, Pune 411004, IN
2 Department of Economics, University of Hyderabad, Hyderabad 500 046, IN

Abstract

Long memory in variance or volatility refers to a slow hyperbolic decay in auto-correlation functions of the squared or log-squared returns. GARCH models extensively used in empirical analysis do not account for long memory in volatility. The present paper examines the issue of long memory in volatility in the context of Indian stock market using the fractionally integrated generalized autoregressive conditional heteroscedasticity (FIGARCH) model. Daily values of 38 indices from both National Stock Exchange and Bombay Stock Exchange are used. The results of the study confirm presence of long memory in volatility of all the index returns. This shows that FIGARCH model better describes the persistence in volatility than the conventional ARCH-GARCH models.

Full Text

     

Gourishankar S. Hiremath ¹, Anver Sadath ², B. Kamaiah ²

Affiliations
1 Department of Economics, University of Hyderabad, Hyderabad - 500046
2 Department of Economics, University of Hyderabad, Hyderabad - 500046, IN

Abstract

An attempt is made in this paper to examine whether stock returns in two premier stock exchanges in India namely, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) follow a random walk. Towards this end, data on major indices during the period 1997 to 2009 are analyzed by using nonparametric Runs and BDS tests. The findings of the study reveal that the stock returns do not follow a random walk during the sample period.

Full Text