Review of Professional Management- A Journal of New Delhi Institute of Management

Ruchi Arora ¹, T. V. Raman ¹, Vinod Kumar ²

Affiliations
1 Amity University, Noida, IN
2 Shri Gurunanak Dev Khalsa College Delhi University, IN

Abstract

Financial meltdowns are cyclical occurrences appearing time and again in all market economy. Though each case of melt down appears to be unique, researchers could find resemblance of crises with each other. Again, analyses found that 2008 crisis, dot com bubbles&other financial meltdowns have the presence of various anomalies in the financial markets. The epicenter of subprime crisis of 2008 was USA while the contagious effects spread fast to all financial markets around the globe and the world has not yet recovered fully from this crisis. Attempts are made to explain the severity of subprime crisis through psychological biases of all players of the financial markets. Psychology comprising of desires, perceptions, emotions, and values, are at the center of behavioral finance. The paper have attempted to explore the behavioral traits influencing financial decision and its reflection among investors, financial institutions, companies and even the government. The paper first focuses on genesis of subprime crisis of 2008 stepwise and then analyses the effect of behavioural biases to explain the intensity of the crisis. Various behavioural biases like herding, over confidence, confirmation bias and greed found to be responsible for causing great financial crisis of 2008.

Keywords

Behavioral Biases, Herding, Global Financial Crisis, Subprime Crisis.

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Atul Kumar ¹, T. V. Raman ²

Affiliations
1 Amity University, Noida Campus, U.P., IN
2 Amity University, Noida, IN

Abstract

The paper is an empirical study on Indian capital market for the period 1^st January, 2010 to 31^st December, 2015. The random walk hypothesis is tested to see the behavior of stock prices. While there are three forms of Market efficiency namely weak, semi strong and the strong, market efficiency of weak form is tested here by applying the Runs test and Auto-correlation test. The random walk hypothesis proves the market efficiency of the Indian market. The Runs test shows the daily return on nifty index does not move in a random manner. The results of the test raise the question mark on the efficiency of the market. Auto-correlation test suggest that there is no serial correlation in the nifty index data which supports the market efficiency in the Indian capital market.

Keywords

Market Efficiency, Runs Test, Auto-Correlation, Random Walk Hypothesis, Unit Root, Augmented Dickey Fuller Test.

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