A Comparative Analysis of Stock Price Behavior on the Bombay, London, and New York Stock Exchanges

J. L. Sharma and Robert E. Kennedy

Journal of Financial and Quantitative Analysis, 1977, vol. 12, issue 3, 391-413

Abstract: The object of the present study was to test the random-walk model, by runs analysis and spectral densities, against representative stock market indexes of the Bombay, New York, and London Stock Exchanges. The three indexes examined were the Bombay Variable Dividend Industrial Share Index (BVDISI), consisting of 603 industrial stocks, the New York Standard and Poor's 425 Common Stock Index (S & P 425), and the London Financial Times-Actuaries 500 Stock Index (London F.T.-A.). The test period covered 132 monthly observations for each index for the 11-year period 1963–1973.The general characteristics of the London F.T.-A. were found to be slightly different from the other two indexes studied. The first difference series the London F.T.-A. has higher mean and variance than BVDISI and S & P 425. However, the first differences of the log indexes did not show any significant differences. In this study, no effort was made to explain any inconsistencies between the London F.T.-A. and the other indexes, although previous studies [4, 12, 13, 20] have attributed such differences partly to institutional The behavior of the BVDISI is statistically indistinguishable from the London F.T.-A. and S & P 425 in terms of the tests of this paper. In runs analysis of consecutive price changes of the same sign, the study confirmed that the expected number of runs and observed number of runs are very close each other. For all the indexes, the actual and expected distribution of length turns out to be extremely similar, with probability equal to 0.5 rise or fall.Further, the spectral densities, estimated for the first difference (raw and log transformed) of each index, confirmed the randomness of the and no systematic cyclical component or periodicity was present. Based tests, it is evident that stocks on the Bombay Stock Exchange obey a random walk and are equivalent in this sense to the behavior of stock prices in markets of advanced industrialized countries examined in this article.

Date: 1977
References: Add references at CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:12:y:1977:i:03:p:391-413_02

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().