Post-colonial Finance

S. Maheswaran, G. Balasubramanian and C.A. Yoonus
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S. Maheswaran: Professor, Centre for Advanced Financial Studies, Institute for Financial Management and Research, 24 Kothari Road, Nungambakkam, Chennai 600034, India. E-mail: mahesh@ifmr.ac.in
G. Balasubramanian: Professor, Institute for Financial Management and Research, 24 Kothari Road, Nungambakkam, Chennai 600034, India. E-mail: bala@ifmr.ac.in
C.A. Yoonus: Research Scholar, Institute for Financial Management and Research, 24 Kothari Road, Nungambakkam, Chennai 600034, India. E-mail: yoonus@ifmr.ac.in

Journal of Emerging Market Finance, 2011, vol. 10, issue 2, 175-196

Abstract: A new variance ratio is proposed in this article that utilises the extreme values of asset prices. On the basis of the specification test, it is documented that there is excess volatility in the Indian stock market, whereas this feature is completely absent in the US. It is also found that such excess volatility is persistent in India in the sense that it gives rise to excessive path dependence. Furthermore, it is shown how such path dependence can be modelled from a theoretical point of view by way of the Binomial Markov Random Walk model.

Keywords: JEL Classification: G12; JEL Classification: G14; JEL Classification: G15; Excess volatility; emerging markets; neo-classical finance; Markov property of asset prices; Binomial Markov Random Walk model (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:10:y:2011:i:2:p:175-196

DOI: 10.1177/097265271101000202

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