International Journal of Financial Management

Som Sankar Sen ¹

Affiliations
1 Assistant Professor in Commerce, Rabindra Mahavidyalaya, Hooghly, West Bengal, IN

Abstract

The present study investigates whether the Indian Stock Market represented by BSE SENSEX is efficient or not. An attempt has also been made to test the assumption of independent and identically distributed (i.i.d) in respect to market returns in terms of daily SENSEX return data, which is the most restrictive version of the random walk hypothesis. The result of unit ischolar_main test shows that the daily SENSEX returns are random. Moreover, to capture the possible non-linearity in the time series data TARCH(1,1) model has been fitted. Furthermore, BDS test has been applied to Standardized residuals of the above estimated model to check whether they are i.i.d. or not. The estimated result of the said test clearly indicates that null hypothesis of i.i.d. could not be rejected. Hence, it could be concluded that daily SENSEX returns follow Random Walk Model-I as described by Campbell et al (1997) and in general Indian Stock Market is efficient in its weak form during the study period.

Keywords

SENSEX, Random Walk Model-I, TARCH(1,1), BDS test

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Som Sankar Sen ¹, Tanmay Bandhopadhyay ²

Affiliations
1 Assistant Professor in Commerce, Rabindra Mahavidyalaya, Hooghly, West Bengal, IN
2 Research Scholar, Department of Commerce ,The University of Burdwan, West Bengal, IN

Abstract

The issue of return and volatility spillover across the stock markets of different countries has become important as return and volatility shock of one market is transmitted from one market to another in terms of information transmission. Present study using the AR(p) - GARCH(1,1) model has investigated the contemporaneous as well as the dynamic return and volatility spillovers from the US stock markets (represented by NYSE Composite Index) to its Indian counterpart (represented by Sensex) and vice versa. A bi-directional contemporaneous return spillover has been reported while a unidirectional dynamic return spillover from US to India is revealed. However, a bi-directional contemporaneous as well as dynamic volatility spillover effect between the two markets is observed barring in the post-crisis period when no dynamic volatility has been reported from the Indian stock market to US stock market.

Keywords

Volatility Spillover, Sensex, NYSE Composite Index, AR(p)-GARCH(1,1)

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Som Sankar Sen ¹

Affiliations
1 Assistant Professor in Commerce, Rabindra Mahavidyalaya, Champadanga, Hooghly, West Bengal, IN

Abstract

The present study has sought to investigate the issue of day-of-the-week effect in Indian stock market. Applying GARCH-M model on the daily NIFTY returns data, a comparative study has been conducted to observe whether there is any difference between two sub-periods that is the period representing before the introduction of the T+2 rolling settlement and that of representing after the introduction of such system respectively regarding day-of-the-week effect in Indian stock market. The findings of the study clearly indicate that there was day-of- the- week effect in the daily NIFTY return during the pre T+2 rolling settlement period. But, such effect vanishes after the introduction of T+2 rolling settlement. However, a significant dayof- the- week effect remains in conditional volatility in the second sub-periods particularly in case of Tuesday. Application of TGARCH model has confirmed the above results.

Keywords

Day-of-the-Week effect, Volatility, GARCH-M, Dummy Variable, T+2 Rolling Settlement

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