Stock market predictability

Silvio Camilleri () and Christopher Green

Studies in Economics and Finance, 2014, vol. 31, issue 4, 354-370

Abstract: Purpose - – The main objective of this study is to obtain new empirical evidence on non-synchronous trading effects through modelling the predictability of market indices. Design/methodology/approach - – The authors test for lead-lag effects between the Indian Nifty and Nifty Junior indices using Pesaran–Timmermann tests and Granger-Causality. Then, a simple test on overnight returns is proposed to infer whether the observed predictability is mainly attributable to non-synchronous trading or some form of inefficiency. Findings - – The evidence suggests that non-synchronous trading is a better explanation for the observed predictability in the Indian Stock Market. Research limitations/implications - – The indication that non-synchronous trading effects become more pronounced in high-frequency data suggests that prior studies using daily data may underestimate the impacts of non-synchronicity. Originality/value - – The originality of the paper rests on various important contributions: overnight returns is looked at to infer whether predictability is more attributable to non-synchronous trading or to some form of inefficiency; the impacts of non-synchronicity are investigated in terms of lead-lag effects rather than serial correlation; and high-frequency data is used which gauges the impacts of non-synchronicity during less active parts of the trading day.

Keywords: Stock markets; National stock exchange of India; Non-synchronous trading; G12; G14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:v:31:y:2014:i:4:p:354-370

DOI: 10.1108/SEF-06-2012-0070

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