1. Plunges in the Bombay stock exchange: Characteristics and indicators.
- Author
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Banerjee, Kinjal, Sharma, Chandradew, and Bittu, N.
- Subjects
- *
STOCK exchanges , *STOCKS (Finance) , *ECONOMIC indicators , *FINANCIAL markets , *RATE of return - Abstract
We study the various sectors of the Bombay Stock Exchange (BSE) for a period of eight years from January 2006-March 2014. Using the data of the daily returns of a period of eight years we investigate the financial cross-correlation co-efficients among the sectors of BSE and Price by Earning (PE) ratio of BSE Sensex. We show that the behavior of these quantities during normal periods and during crisis is very different. We show that the PE ratio shows a particular distinctive trend in the approach to a crash of the financial market and can therefore be used as an indicator of an impending catastrophe. We propose that a model of analysis of crashes in a financial market can be built using two parameters: (i) the PE ratio and (ii) the largest eigenvalue of the cross-correlation matrix. [ABSTRACT FROM AUTHOR]
- Published
- 2017
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