Variance ratios, structural breaks and nonrandom walk behaviour in the Indian stock returns

Gourishankar Hiremath and Kamaiah Bandi

MPRA Paper from University Library of Munich, Germany

Abstract: The paper investigates the issue of behaviour of stock returns in India. A non-parametric variance ratio test is used to examine the issue. Largely the results indicate non-random walk behaviour of Indian stock market. However, the sub-sample analysis of stock returns based on structural breaks show an increasing mean-reverting tendency after occurrence of structural breaks in the series. The events associated with break dates mainly are volatile exchange rate movements, oil shocks, internet bubble burst, sub-prime crisis, global economic meltdown and political uncertainties. Rejection of random walk is relatively stronger for smaller and medium indices than larger indices implying that market capitalization and liquidity play a greater role in improving efficiency of the market.

Keywords: Variance ratio; random walk; market efficiency; mean-reversion; BSE; NSE; Indian stock market. (search for similar items in EconPapers)
JEL-codes: G0 G11 G14 G17 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

Published in Journal of Business & Economic Studies 18.2(2012): pp. 62-81

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