Some Further Evidence on the Behaviour of Stock Returns in India

Gourishankar Hiremath and Kamaiah Bandi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the stock return behaviour in two premier Indian stock markets using Chow-Denning multiple variance ratio and Hinich bicorrelation tests. The former test overcomes size distortion of conventional variance ratio test. The latter test is capable of detecting linear and non-linear dependencies. The study is based on 14 indices relating to the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), and relates to the period 02/06/1997 to 30/01/2009. The Chow-Denning test rejects the null of random walk for six indices. The Hinich test rejects the null of pure white noise for full sample period. However, the windowed test results of Hinich show that the serial dependencies are not consistent across the sample period for all indices. This indicates presence of episodic dependencies in stock returns surrounded by long periods of pure noise.

Keywords: Random walk; serial dependence variance ratios; bi-correlation; episodic dependencies; non-linearity; mean-reversion; pure noise; Indian Stock Market; NSE; BSE (search for similar items in EconPapers)
JEL-codes: G0 G00 G14 G17 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in International Journal of Economics and Finance 2.2(2010): pp. 157-167

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