Variance Ratio Test, ARIMA Model and Stock Price Behaviour

Raj S. Dhankar ()
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Raj S. Dhankar: University of Delhi

Chapter Chapter 6 in Risk-Return Relationship and Portfolio Management, 2019, pp 95-112 from Springer

Abstract: Abstract This study investigates the stock price behaviour of Indian stock market using BSE Sensex as well as 30 individual underlying shares included in the Sensex. Variance Ratio testVariance Ratio test (VR test) for the market index suggests dependency of the aggregate market series, which violates the assumption of Random WalkRandom walk HypothesisHypothesis (RWH). However, the test results manifest mixed behaviour of return generating process for individual companies. The study has also developed one forecasting model for the market index using the ARIMA process. The AR (9) model has been found to be an appropriate model for forecasting future returns to the Sensex, the validity of which is of course, subject to real-world experiments.

Date: 2019
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DOI: 10.1007/978-81-322-3950-5_6

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