Are there Benefits from Sectoral Diversification in the Indian BSE Market? Evidence from Non-Parametric Test

Aviral Tiwari and Faridul Islam ()

Indian Economic Review, 2012, vol. 47, issue 2, 285-306

Abstract: This paper tests the weak form of stock market efficiency using data on eight sectoral indices from the Bombay Stock Exchange (BSE, India). The aim is to examine if portfolio diversification strategy can be used by investors to make financial gains. For this purpose we implement the Breitung’s (2002) non-parametric unit root test and the Bierens’s (1997) and Breitung’s (2002) non-parametric cointegration test. Based on the results, we find that the BSE sectoral indices satisfy the weaker form of efficiency. The cointegration tests suggest that there is no common trend which can bring these BSE indices together in the long run. This implies that the benefits of diversification are enormous within these indices.

Keywords: Bombay Stock Indices; India; Structural Breaks; Non-parametric Cointegration Test (search for similar items in EconPapers)
JEL-codes: C43 C53 F36 (search for similar items in EconPapers)
Date: 2012
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