Stock market predictability: Non-synchronous trading or inefficient markets? Evidence from the National Stock Exchange of India
Silvio Camilleri () and
Christopher Green
MPRA Paper from University Library of Munich, Germany
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: We test for lead-lag effects between the Indian Nifty and Nifty Junior indices using Pesaran-Timmermann tests and Granger-Causality. We then propose a simple test on overnight returns, in order 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: (a) we look at overnight returns to infer whether predictability is more attributable to non-synchronous trading or to some form of inefficiency, (b) we investigate the impacts of non-synchronicity in terms of lead-lag effects rather than serial correlation, and (c) we use high-frequency data which gauges the impacts of non-synchronicity during less active parts of the trading day.
Keywords: Non-Synchronous Trading; Stock Markets; National Stock Exchange of India; Granger-Causality; Pesaran-Timmermann test. (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)
Published in Studies in Economics and Finance 31.4(2014): pp. 354-370
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:95302
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