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Presents a bibliography of studies related to financial development and economic growth that were published in the December 2005 issue of "Finance India." "The Impact of Banking and Fiscal Policies on Economic Growth," by Burton A. Abrams et al; "Volatility of International Financial Markets: Regulations & Financial Supervision," by J. D. Agarwal; "Stock Markets and Development," by R. Atje and B. Jovanovic.

This paper presents the Neural Networks(NNs) ability to forecast the Stock Market Prices. Neural Networks have gained importance in the field of forecasting because of their Non-Parametric approach as well as their ability to learn the behaviour of the series when properly trained. In this paper, Neural Networks and Multiple Regression techniques are employed to model and forecast the stock market prices and then the results of these two models are compared. The forecasting ability of these two models is assessed using MAPE, MSE and RMSE. Also, probability of market rise and fall is calculated. The results show that Neural Networks, when trained with sufficient data and proper inputs, can predict the stock market prices very well. Multiple regression Analysis though well built but their forecasting ability is reduced as the series become complex. Therefore, Neural Networks can be used as an alternative technique for forecasting the stock market prices. [ABSTRACT FROM AUTHOR]

Internationalization of capital markets offers diversification opportunities to the investors. This generates interest in the study of interlinkages among stock markets. The present paper studies the inter-linkages between stock markets of India, Pakistan, Bangladesh, Nepal and Maldives. Daily closing levels of the benchmark indices in the three countries are taken for a period of July 2004 to June 2010. Line charts, correlogram and unit-root test are applied to check the stationary nature of the series. Granger's causality, Vector Auto Regression (VAR) and Variance Decomposition Analysis are performed to find out the linkages between the markets under study. The paper finds that the returns at National Stock Exchange (India) and Colombo Stock Exchange (Sri Lanka) are inter-linked. Other than India-Sri Lanka vector, the linkages between the South Asian stock exchanges are not confirmed, which means that the opportunities for diversification do exist in the South Asian region. [ABSTRACT FROM AUTHOR]

In this paper, we provide evidence that the opening stock price contains noise on an everyday basis among all the NIFTY companies. However, we also find that the impact of noise does get eliminated from prices at the end of the trading day. We show how these seemingly contradictory twin empirical findings about the Indian stock market can be reconciled by proposing a Noise Trading Model in the framework of Kyle (1985). Given the clear importance of noise in opening prices, it becomes interesting to investigate whether or not we can come up with a trading strategy that can make use of noise. The paper A suggests a simple trading strategy for stocks that contain noise. The strategy suggests that when the overnight return is positive, we need to short the stock at the opening and buy it back at the closing. When overnight return is negative then simply buy at opening and sell at closing. [ABSTRACT FROM AUTHOR]

The paper propose to target the segments where we expect to have an overconfidence bias and to consider the differences of opinions on these segments as proxy of market's differences of opinion. In particular, we focus on variable capital investment firms which manage stocks portfolio. The paper uses the number of sale positions in VCIF divided by the total number of VCIF as a proxy of overvaluation of Tunisian Stock Market. Moreover and in the objective of controlling mimetic behaviour, model introduces a variable of control which is the variable total handling of titles in the sector of VCIF divided by the firm's capital market. The results show that on Tunisian stock market, the prohibition of shorting play an important role in the determination of prices behavior. In particular, it is at the origin of overvaluation which is gradually corrected. [ABSTRACT FROM AUTHOR]

There is growing acceptance in financial economics that the beta of the Sharpe (1964), Lintner (1965) and Black (1972) Capital Asset Pricing Model (CAPM) is lacking in cross-sectional explanatory power. This paper examines the two most commonly used additional explanatory factors, size and book to market equity in three Asia-Pacific markets where little evidence exists as to their applicability in explaining the cross-sectional of stock returns. This paper tests for evidence of multifactor risk premia from markets outside the US. We find that the overall market factor is highly significant in all the markets and the magnitude of significance of the other two factors (size and book to market equity) varies across countries. We also reject the claim that the multifactor model findings can be explained by the turn of the year effect. At a minimum, these factors do a reasonable job in explaining the variation in security returns. [ABSTRACT FROM AUTHOR]

The central goal of this paper is to study the small sample properties of non-parametric multiple variance ratio tests and the runs test and to apply suitable tests on the daily data of the stock prices of Indian sectoral indices to study their martingale behavior. We have also used moving a subsample approach to examine the dynamic behavior of the test statistics. This helps us to identify the sensitivity of results to a particular sample period and to obtain inferential findings robust to possible structural changes and presence of influential outliers. Joint sign test turns out to be better than other tests for sample size less than and equal to 1000. Our results provide evidence against the weak-form efficiency of all the sectoral indices, except for CNX IT. According to our analysis based on the moving sub-sample approach, except for BANK NIFTY and CNX INFRA, all the other indices have become more efficient after the sub-prime crisis. [ABSTRACT FROM AUTHOR]

This paper reports the results of a series of tests carried out to examine weak-form efficiency of the Saudi Stock Market (SSM). The paper examines whether SSM follows a martingale process. Both traditional and newer econometric techniques were applied to test the data between 22 January 1994 and 31 December 2007 (inclusive) of eight industry-based indexes and a composite index. The outcomes of the ten different tests indicate mixed results. The unit root tests, Lo and MacKinlay variance ratio, and Chen and Deo multiple variance ratio test largely cannot reject the random walk hypothesis for both daily and weekly data. With the run test, and rank- and sign-based single and multiple variance ratio tests, the random walk hypothesis is mostly rejected for the daily data and some of the weekly indexes. Since the data are highly non-normal, the other tests may have low power, and the rank- and sign-based tests may be most appropriate. [ABSTRACT FROM AUTHOR]

In this paper, we study the effect of foreign institutional investment (FII) on the stock market of India and find that FII has a direct and significant effect on the returns of the Indian stocks. We also examine the determinants of the FII in Indian markets and find that net FII increases with an increase in the Indian stock returns and vice versa. We also document that high interest rates in India result in reduced FII, and the net FII increases with a decrease in the P/E of Indian stocks. Strong dollar lowers net FII, and high inflation in the U.S. results in reduction of net FII in India. We investigate the role and impact of FII whether they stabilize or destabilize the domestic markets. Whether the Indian stock market is influenced by the FIIs in a position or negative is determined. The FIIs has a statistically significant influence on the stock market returns, even after fundamental economic factors are controlled is finally investigated along with the factors responsible for purchasing and selling decisions by FIIs to reduce erratic investment patterns. [ABSTRACT FROM AUTHOR]

The paper seeks to explore possible volatility transmission mechanism within the economy, if any for Indian stock market in recent years. Specifically, it tries to explore whether sectoral shocks are being transmitted to the market and vice versa. The capital goods and the consumer durable sectors are the two most predominant sectors, their contribution to the volatality of SENSEX being the most. Among the major findings, this paper discerns that market to sector volatility transmission has been more prominent in case of BSE SENSEX than BSE200; while sector to market volatility transmission has been more significant in case of BSE200. Most of the market volatility is coming from the variability in capital goods sector and consumer durable sector. However, the IT sector has an insignificant impact on market volatility and its variability is hardly influenced by that of market. Hence, even in this era of globalization, IT sector remains an isolated sector, while traditional sectors remain the most important ones. [ABSTRACT FROM AUTHOR]

With increasing doubts over the capabilities of the existing asset pricing models, Fama and French in the 1990s, developed the Three-Factor Model (TFM) as an extension to CAPM with two added premiums: size and value. This paper applies TFM theory to India to provide an insight into its validity in an emerging market.A priori information requires all three variables to show a significant positive relationship with excess returns but in this study, results indicate a number of discrepancies. The regressions find many coefficients insignificant and in some cases, show negative relationships between excess returns and the size and value premiums. The value premium particularly, appears negative for lower beta portfolios questioning the stability of the variable across beta values. The regressions represent high explanatory power but like in literature, this may be attributable to survivor bias or data snooping. Thus, it can be concluded that TFM is not a good fit in India over the chosen sample period. [ABSTRACT FROM AUTHOR]

The classical problem of portfolio optimization is to find the best way of investing a capital in securities such that not only the expected return is maximized, but also the risk is minimized. Recently, much more attention has been given to the mathematical programming models. The well-known model proposed by Markowitz considers mean variance into a quadratic programming. Speranza proposed an integer-programming model, which takes the transaction cost and minimum transaction units into account. In this paper, the model proposed by Speranza for portfolio optimisation is considered as base model andan integer program is developed that covers any kind of investment, which will have benefits for investment companies, stock market analysts, banks and insurance agencies on their investment decision making. For practical problems, the model is hard to solve, but analyzing the constraints leads to a heuristic method, which finds solutions. The computational results approve the efficiency of the model and the algorithm. [ABSTRACT FROM AUTHOR]

This paper examines the impact of introduction of derivative securities on volatility of underlying stocks and index. Though the empirical evidence in international arena is mixed, the results of this study support the declining volatility hypothesis in context of the Indian stock market. It also indicates that derivatives have stabilizing effect and their introduction has led to decline in volatility of underlying assets. The findings have largely remained the same when volatility has been examined with different diagnostic tools or for different sample periods. Finally, these findings provide rationale for introduction of futures and option contracts on more stocks as they contribute to enhancing the efficiency of underlying stock market. The study has important policy implication on the derivatives markets. The study making a favourable case of empirical evidence for deepening the derivatives segement in India. [ABSTRACT FROM AUTHOR]

This paper tests the relationship between the U.S. Stock market and the housing market, using monthly data from 1963:01 to 2005:07. The main focus is on testing the relationship daring periods of major stock market declines. Two episodes of stock market declines have been chosen for testing, i.e. period 1973:01-1974:12 and 2000:01-2002:09. After pre-testing the data, an error-correction model (ECM) is estimated for the full sample period and for each of the two episodes of stock market declines. Results show strong evidence of causality from stock market to housing market. More important, the causal nexus seems to get stronger during periods of stock market declines, as investors substitute real assets for financial assets. The findings imply that the positive wealth effect of rising housing prices may help offset the negative wealth and re-affirm the value of portfolio diversification and asset allocation strategy. [ABSTRACT FROM AUTHOR]

Evidence of inefficiencies existing in the Indian Stock Market has once again generated interest in technical analytical methods, which attempt to achieve superior returns based on past price movements. This paper tests and describes the applicability of trading rules in the Indian stock market under the present scenario with a ban on short-selling. It also analyses the effect of transaction costs on the prospective returns for an individual investor and the utility of a percentage band to remove erroneous Whiplash signals. The paper further explores and hypothesises that individual investors should be able to outsmart the market post-transaction-costs using longer moving averages which represent long-term market cycle trends, since these will involve low transaction costs but such gains are likely to be achieved over long cycle times since longer moving averages capture long cycle trends. [ABSTRACT FROM AUTHOR]

This paper investigates the existence of inter-dependence between the Indian stock market (ISM) and Asia's emerging markets since 1990. This study analyzes whether the MSCI Asian Index has significantly influenced the Bombay Stock Exchange Index before, during, and after the Asian financial crisis To address Ibis issue, we first use a rolling correlation, and conduct uni-directional and bi-directional causality tests using a Granger causality test. We then examine impulse response functions and variance decompositions of forecast errors based on a VAR model These tests provide evidence that the influence of the Asian market on the Indian market has increased during and after the Asian financial crisis. We interpret these results as evidence that the Indian market is moving toward integration with other Asian markets. We conclude that the influence of the Asian markets on the movements in the ISM has been rising since the periods during and after the crisis. [ABSTRACT FROM AUTHOR]

A number of procedures have been developed for testing of the validity of directly. The empirical literature efficient Market Hypothesis applying these techniques, however, does not provide any definitive answer to the vital issue of market efficiency. In many instances it appears that the conclusion on the issue is sensitive to the choice of methodology and time period. Based on the empirical results, it appears that the performance of ANN technique in forecasting all these series is very encouraging. The paper finds that our of sample forecast accuracy of Artificial Neural Networks (ANN) models, as measured by a number of criteria like AAE, MAPE, Rbar-square, etc. is much better as compared to those of 'Random Walk' models. It is perceived that if market is efficient, price movements follow a 'Random Walk (RW)' path and thus reasonably good forecasts would be generated by employing RW model. [ABSTRACT FROM AUTHOR]

On December 27,2010, Bombay Stock Exchange Ltd. (BSE) and Taqwaa Advisory and Shariah Investment Solutions (TASIS) launched the BSE TASIS SHARIAH 50 Index. This being the first shariah complied index in India was much awaited. This index would open the new horizons of investment in stock market by people from Islamic Society. This paper not only focuses on the performance of BSE TASIS Shariah 50 Index but also attempts to compare the performance of BSE TASIS Shariah 50 index vis as vis BSE 500. The daily and the weekly data for both the indexes have been studied in order to compare the performance of the Shariah Index vis a vis its source index i.e BSE 500. The study reveals that there is a very high degree of correlation in the performance of both the indexes. As far as risk and rewards of both the indexes are concerned, the results show that shariah index outshine BSE 500 in terms of risk and reward both. [ABSTRACT FROM AUTHOR]

In the context of stock markets, seasonal effects that contradict the Efficient Market Hypothesis have been documented over several years. These effects are trends seen in stock returns where the returns tend to rise or fall during a particular season. They are called "anomalies" because they cannot be explained by traditional asset pricing models. Seasonality could be month-of-the-year effect, day-of-the-week effect, intra month effect, holiday effect, Halloween effect or festival effect. The present paper focuses on the month-of-the-year effect. As the name suggests, the month of the year is a seasonal phenomenon where exchange traded equities tend to produce abnormal returns during particular months of the year. The study is tests the month of the year effect in Indian Stock Markets at two levels i.e. Macro Level and Micro Level. Macro level's seasonality is assessed in Major Indian Stock Market indicators namely SENSEX, BSE 100 and NIFTY between January 2000 and December 2008. At Micro Level 43 companies traded in BSE and NSE are examined during the same period. [ABSTRACT FROM AUTHOR]

This paper investigates the interaction between institutional investment and market return in Indian stock market. We have used daily net investment data of Foreign Institutional Investors (FIIs) and Mutual Funds (MFs) from January 2000 to December 2009. Empirical result has shown that FIIs investment is positively related to lagged market return whereas MFs investment is negatively related to lagged market return. Bi- directional causality is found between FIIs investment and market return whereas in case of MFs only market return causes the investment. Impulse response analysis confirms that impact of shock to market return is more lasting on institutional investment than otherway round. Sub- period analysis confirms that relationship between FIIs flows and market return did not change significantly during the study period in comparison with MFs. [ABSTRACT FROM AUTHOR]

The present paper endeavors to empirically investigate the long run equilibrium relationship between the stock market of India, U.S., China, Singapore and Germany with special emphasis on evaluating the influence of U.S. based global financial crisis (2008) on this long run relationship. This exercise is based on the monthly closing data of the stock market indices for all the selected countries. Single equation Engle-Granger co-integration approach has been applied to examine one to one relationship of Indian stock market with the stock markets of other countries. The influence of U.S. financial crisis (2008) has been seen with the help of dummy variables. Apart from single equation analysis, another approach called multivariate approach given by Johansen and Juselius(1988,1991) is employed to study long run relationship among all the stock markets which suggests that co-movements of stock prices among the selected countries has increased after the 2008 financial crisis. [ABSTRACT FROM AUTHOR]

The main objective of this paper is to investigate the behavior of stock returns in ten major Asia-Pacific countries, namely, Australia, China, Hong Kong, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, and Taiwan. We employ a battery of techniques to test the weak-form market efficiency, commonly refereed to as the random walk hypothesis. We use daily stock market closing prices, covering the period January, 2000 to December, 2006 in all our estimations. There is an overwhelming evidence to show that these markets, by and large, are weak-form efficient. The main implication is that it is not possible to have some trading strategies and actually beat the market. These findings also seem to reaffirm the importance of portfolio diversification as an investment strategy. On macro level one may even argue that, by providing an efficient conduit for an efficient allocation of available capital resources, these markets can potentially enhance these countries' growth prospects. [ABSTRACT FROM AUTHOR]

The Ordinary Least Square (OLS) estimate of beta has been widely sed as a measure of systematic risk in investment and portfolio analysis. The estimation is based on the assumption that beta is stationary over ime. But numerous studies show that beta is unstable over time. So the use of OLS method in investment and portfolio analysis will yield an nefficient estimate of systematic risk. Considering beta as a random variable this paper attempts to give an estimate of beta coefficients with he help of Bayesian approach where prior distribution of beta is considered as uniform and truncated normal. The result of the study clearly shows the difference in the estimation of beta by the traditional OLS beta and Bayes estimator. By looking at differences between the Bayesian and OLS estimator it is hard to decide which are safer risks one can take for investment decision are. There is a scope to obtainan interval where beta is supposed to be safer for investment decision. [ABSTRACT FROM AUTHOR]

The paper aims to observe initially the evolution of the valuation practices of financial analysts by studying the valuation methods contained in analysts' reports from innovative firms listed in New Market. We provide a descriptive analysis for the use of alternative valuation methods. Using a sample of 45 companies belonging to the areas qualified of the "New Economy" and introduced to the New Market of the Stock exchange of Paris over the period 2000-2002, our study concludes that the financial analysts use mainly the method of the free cash flows and the market comparison. The study found that the choice of the withheld methods doesn't depend on the industry segment of the estimated company or on the year of evaluation. The study revealed that behavior of initial shareholders towards valuation method is influenced by the industry. The method of real option is completely absent in the practice of evaluation. The study also provides a basis for further research that test a richer and more detailed set of hypotheses. [ABSTRACT FROM AUTHOR]

This paper studies the effect of expiration day of the Index futures and Options on the trading volume, variance and price of the underlying shares. Expiration day price effect may arise from a combination of factors including the existence of index arbitrage opportunity, cash settlement feature of index options and futures and attempts to purposely manipulate prices. The earlier studies have, however, drawn their conclusion without rigorously modeling the underlying stochastic data generation process. We propose to address this crucial shortcoming by examining the expiration day effect from a GARCH framework. We use both daily and high frequency (5-minutes and 10-minutes) data on S&P Nifty Index. Our central finding using intra-day is that while there is no pressure-downward or upward-on index returns, the volatility is indeed significantly affected by the expiration of contracts. This effect, however, doesn't show up in daily data. [ABSTRACT FROM AUTHOR]

The present paper is aimed at checking weak form of efficiency hypothesis for Indian stock market by using daily data for Bombay Stock Exchange, Sensitive Index (sensex) for the period July 1, 1991 to Dec. 29, 2006. The Indian stock market indicated efficiency as random walk hypothesis for sensex is accepted. The results of variance ratio test and unit root test are similar and accept the random walk for Indian stock market but the results from autocorrelation and Ljung Box (QLB) test reject the hypothesis of random walk. Since variance ratio test is more powerful than the other tests performed in the study, we go by the results of variance ratio test. The volatility persistence is due to the asymmetry in the availability of publicly available information other than historical prices of stock indices and private information, which is generally withheld by select groups such as mutual funds, management, financiers and stock exchange officials. [ABSTRACT FROM AUTHOR]

This paper presents an empirical study on predictability in the Indian stock market, based on cointegration analysis involving a stock price index and relevant macro and financial variables. This exercise has been done separately for each of the three most important stock indices viz., BSE SENSEX, BSE 100 and NIFTY. Following essentially Johansen's approach, our findings based on the trace and maximum eigenvalue tests indicate that there exist cointegrating relations involving a stock index and the following macro variables viz., domestic industrial production, consumer price index, nominal exchange rate, foreign direct investment and long-term interest rate. Further, the cointegrating relations corresponding to each of the three stock indices involve the same set of macroeconomic variables as stated above. None of the other variables considered in this study viz., and the financial ratios has been found to be significantly involved in the cointegrating regressions. [ABSTRACT FROM AUTHOR]

The paper re-visits the stock market reforms with respect to its effects on corporate financing and savings. On account of factors, such as booming stock market and high cost of credit, the corporate financing changed from equity financing during the mid-1980s to debt financing during the mid-1990s. Earlier finding showed that expansion in stock market financing during the 1980s was neither associated with a rise in aggregate GDS nor with an increase in the proportion of financial savings. It is observed that movement of household savings towards stock market did not merely represent a reallocation of households' funds from bank deposits to stock market instruments. It was also accompanied by a rise in the share of aggregate GDS in GDP. Further, while the household sector was more responsive to the stock market reforms from the mid-1980s to the early years of economic reforms, the corporate sector showed greater responsiveness during the post-reform years. [ABSTRACT FROM AUTHOR]

In this paper, we find that there exists a nonlinear relationship between futures and cash indexes. Within the arbitrage bounds, the change in- basis can affect prices in both markets and a significant feedback relationship between futures and cash markets is noted. Besides, price discovery is not evident in the futures markets due to almost the same speed of information flows in both markets. While outside the arbitrage bounds, the influence of the change in basis on both futures and cash indexes is statistically insignificant and the change in the futures price leads the cash price, thereby indicating notably the function of price discovery in the futures market. As a result, the Bivariate model that allows for dynamic interrelationship between futures mid cash prices is better than the traditional one in revealing both the price discovery of futures and cash indexes and arbitrage behavior within and outside the arbitrage bounds. [ABSTRACT FROM AUTHOR]

The paper aims to present theoretical framework of efficiency of stock markets and test the Indian stock market for weak form efficiency. Statistically, the study shows that Indian stock markets are weak form efficient and price changes follow a random walk. Data for the period 1st April 2005 to 31st march 2007 has been used for Sensex and Nifty. For other BSE indices and individual share prices, data for one year from 1st April 2006 to 31st March 2007 has been used. Though no tests of trading rules have been carried out, statistical independence of price changes does imply that trading rules based on technical analysis can not be used to earn excess risk adjusted returns. Increasing investor interest in emerging markets has motivated a great deal of research aimed at understanding the return risk characteristics of stock prices in these markets. [ABSTRACT FROM AUTHOR]

The purpose of current study is to investigate whether a stock split is still considered a policy that creates value for the underlying company and the rational behind such action for companies listed on the BSE-sensex. The event study methodology of Strong is employed to examine the effect of stock split ex-date on stock prices. This paper examines the effect of stock split on return and liquidity for the stock performing the part of the BSE Sensex around the Ex-date. Empirical evidence suggests that stock splits are associated with positive abnormal return on the day of the stock split Ex-Date as well as on the day following the Ex-date. Thus the result indicates that market registers an increased activity in the stock near the Ex-dates of stock split when it associated with liquidity we can observe a clear trend of measuring liquidity as measured by increased turnover around the event date. [ABSTRACT FROM AUTHOR]

The segmentation scales derived from the systematic risk contributions of the countries to the world market index indicate, some degrees of segmentation in global equity markets. However, there is an increased trend toward integration. The beta coefficients and cross correlations of dollar returns verify these findings, We observe a contagion effect in 1990s and cointegration effect for developed countries and emerging markets within their own subsets. The degree of integration for emerging markets is much less than that of developed countries. Emerging markets still keep their importance for the global equity portfolios. The paper show that the degree of segmentation in the global equity markets across countries and cross developed continues vs. emerging markets are not the same and benefits of global diversification still continue. [ABSTRACT FROM AUTHOR]

The paper analyzes the varying perceptions of stock price volatility of Indian capital markets along with identifying possible reasons for volatility and measures the degree of volatility. It is evident from the values of co-efficient of variation and standard deviation that the market capitalization of NSE was highly volatile or less consistent when compared to BSE. There was a greater crash in the market prices was on account of Kethan Parekh stock market scam, Coupled with bearish trend in the markets apart from various other factors. Number of companies listed has declined abnormally over a decade and the share of NSE as increased significantly and equaling with that of BSE listed companies. Volatility in number of shares traded daily on NSE and BSE varies between 1.90 to 1.24 and 2.00 to 1.32 respectively. This represents that the volatility rate in BSE is greater than that of NSE. Relevance of the budget on stock price volatility is diminishing every year because of the critical policy decisions are taken on a regular basis by the government. [ABSTRACT FROM AUTHOR]

In an attempt to examine the market efficiency and volatility of stock market, forex market and bullion market in India during the last one year (October 2003 to September 2004). This paper suggests that stock, forex and silver markets are efficient compared with gold market; but at the same time gold is the lowest volatile market. Absence of a large number of participants to influence movement in the prices call be the reasons for lower degree of efficiency ill the gold market. Lower volatility of gold market maybe judge by the fact that gold has the characteristic of currency ill the global market and the Reserve Bank of India take regulation and supervision when it is necessary. On the other hand forex market, which is observed to possess lower degree of market efficiency next after gold, is the highest volatile market. Higher volatility in the forex market does not imply stability in the financial market as a whole because funds flow from one market to another. This might play an adverse effect in promoting industrialization and growth in our country in the long run. [ABSTRACT FROM AUTHOR]

Theoretically, the stock markets are considered as rational and efficient institutions. However, instances of mass hysteria occur when stocks are massively overvalued by the experts and investors leading to disastrous stock market crashes. Predicting the behaviour of stock markets is perhaps one of the most difficult task. Present paper examines the existence of size anomaly in Indian stock market and suggests a trading strategy that could help an investor earn superior returns. A sample of 240 BSE listed companies over a period of six years (September 1996 to September 2002) has been taken. The empirical results undisputedly indicate that the small size firms outperform the larger firms not only on the basis of raw returns, but also on the basis of risk adjusted performance measures. The study indicates existence of size anomaly as the smallest decile has earned four times the mean return of the highest. It also indicates a descending stair-step pattern in the return distribution of different Size portfolios. [ABSTRACT FROM AUTHOR]

This paper investigates the long run and short run relationships among selected Asian stock index futures markets (i.e., Malaysia, Singapore, Taiwan and Hong Kong). Johansen's cointegrations test has been used to study file long run equilibrium relationship among the four stock index futures markets. Hence, potential for risk minimisation through diversification of index, futures across these markets is less for investors with long holding periods. The error correction term revealed that the Taiwan stock index futures market plays the leading role in driving the movements of the other markets towards the long run equilibrium. Since the four stock index future markets are cointegrated, the causal relations among these variables are examined within one Vector Error Correction Model (VECM) which allows the combinational short-run and long-run dynamic adjustments among these variables. [ABSTRACT FROM AUTHOR]

This paper investigates four calendar anomalies, viz., Day of the Week effect, Monthly effect, Turn of the month effect and Month of the year effect across five countries of South Asia. The day of the week effect, have been found to exist in Sri Lanka and Bangladesh; and the intra-month return regularity, in terms of Monthly effect and Turn of the month effect, is present in the Indian market. The Month of the year effect has not been found in any of the five countries studied. The anomalous behavior is not pervading across the five countries and there is little influence of one market over the other, so far as calendar anomalies are concerned. However, appropriate trading strategies may be designed to exploit the observed regularities profitably after taking into consideration the transaction costs. The findings outline the advantage from investment at the turn of the month and during the first half, as opposed to the rest of the month. [ABSTRACT FROM AUTHOR]

In this paper various tests to investigate the weak form of the efficient market hypothesis for four African stock markets -- Ghana, Mauritius, Egypt and South Africa have been employed. The results of both parametric and non-parametric tests show that the South African stock market is weak form efficient, whereas that of Ghana, Mauritius and Egypt are weak form inefficient. This implies that successive security returns on the South African market are independent and follow a random walk. The same cannot be said of the other three markets. Consequently, we also fitted an ARIMA model to the excess return data for Ghana, Mauritius and Egypt using the Box-Jenkins method. The ARIMA models are then used to generate one-period ahead forecasts for the subsequent 12 periods for these three countries. The ARIMA forecasts outperformed the naïve model, corroborating our initial inefficiency results from the earlier tests. [ABSTRACT FROM AUTHOR]

The relevance of beta as a measure of risk depends on the stationarity of beta over rime. The paper discusses the stationarity of beta in the Indian capital market using a sample of thirty eight equity securities listed in the Stock Exchange Mumbai. The study uses weekly closing prices from May 11, 1990 to February 6, 1996. The average beta based on Sensex is .8634 and based on BSE100 index is .7398 and no security has negative beta. The market explains roughly 5 to 60 percent of the variance in the individual security returns. Product Moment Correlation and Rank Order Correlation show that the betas are not stationary over rime and hence beta cannot be used as a measure of future risk for individual securities and small portfolios. The paper, further, finds that the betas have the regression tendency of moving towards the mean beta of 1. [ABSTRACT FROM AUTHOR]

Equity derivatives have become popular financial products in Indian capital markets since 2003. Trading on derivatives tend to make the underlying spot markets more liquid and informationally efficient. Despite the financial crisis in the year 2008 the turnover in derivative market was 4 times then that of spot market. Volatility impact has been examined with the help of asymmetric GARCH model. GJR GARCH (1, 1) was used to model the heteoroskedasticity and examine the changes in the post introduction period. It is been found that the individual stocks became less volatile in the post introduction period in the short term more precisely in the following 2 years period. The decomposition of observed volatility indicates that the recent news as well as the past news exhibit greater impact on the stock prices in the post introduction period. Volatility persistence also increased substantially in the post introduction period. [ABSTRACT FROM AUTHOR]

The perception is that under the existing global economic structure and developments the global stock markets of most countries are becoming gradually more integrated. Indian markets are no more exception to these developments and in India the issue is also gaining attention in the post liberalization era. With this background, the research aims to examine the common perception of global integration from an Indian stock market perspective. The investigation was carried out, in the first instance, in a straightforward way. The aim was to ascertain whether the Indian stock market is integrated with three Asian markets, namely Hong Kong, Singapore, and Japan and the four other global markets of the USA, UK, Germany and France, perceived to be driving Indian stock prices. Based on monthly data series from April 1992 to March 2009 both the long-run relationships and the short-run dynamics operating between the seven markets under the global economic and financial system were studied. The findings of the study suggest that Indian stock markets are very much integrated with other global markets in short run but less integrated in long run. [ABSTRACT FROM AUTHOR]

The present study examines the impact of futures trading on contemporaneous and intertemporal relationships between return, volume and volatility in Indian stock market using daily data of closing prices and volume of Nifty index from January 1997 to June 2006. The results of ARMA (3,2), GARCH (1,1), EGARCH (1,1) and Granger causality test indicate the presence of information asymmetry, inefficiency and leverage effect in Indian stock market. However, after the introduction of futures the quality of information flowing has improved to the cash market. The inefficiency in market can be attributed to the asymmetric profile of traders in two markets. The results show the introduction of futures trading has significantly altered the structure of return, volume and volatility relationship. Specifically, while there is evidence of more information flowing into spot market following the onset of trading, this new information is assimilated into prices less rapidly than before the onset of trading, leading to an increase in the persistence of volatility. [ABSTRACT FROM AUTHOR]

The three factor Fama-French (1993) model was tested for the Indian stock market from 1991-2002 including four sub periods. Together the three factors, excess return over market, returns on small minus big stocks, and returns on high minus low book to market ratio stocks, are able to explain the returns better than any single factor or combinations of two factors. The market factor had the highest correlation with returns, while the size factor was dominant in explaining the cross section of returns. However, the importance of the market factor reduced steadily, while the correlation, with size increased to some extent. The impact of the three factors on various portfolios reduced from 95-98% to 55-88% over the period studied. The study revealed that three factors, excess return over market return SMB and HML are together able to explain the return better than any single factor or a combination of factors. [ABSTRACT FROM AUTHOR]

The present study has undertaken a comprehensive investigation of co-movement in stock returns and volume change using daily National Stock Exchange data for twenty-one listed firms from 1996 to 2005. It is observed that the direction of causality between stock returns and volume change vary over different periods and across firms. Generally there are causal relationships between volume and price over the full period. Once we take the three sub periods the relationship starts to weaken over the sub periods for most of the stocks. The study further indicates that most of the companies do not show long-term spillover effect on volatility as evident generally in short run. However, some major players in Indian stock market show evidence of long-term spillover volatility effect. The study indicates towards the presence of inefficiencies on the National Stock Exchange, which weakens in the later sub-period. [ABSTRACT FROM AUTHOR]

The Indian stock market is one of the earliest in Asia being in operation since 1875, but remained largely outside file global integration process until the late 1980s. This paper empirically investigates the long-run equilibrium relationship and short-run dynamic linkage between the Indian stock market and the stock markets in major developed countries after 1990 by examining the Granger causality relationship and the pairwise, multiple and fractional cointegrations between the Indian stock market and the stock markets from these three developed markets, Indian stock market is integrated with mature markets and sensitive to the dynamics in these markets in a long run. In a short run, both US & Japan Granger causes the Indian stock market but hot vice versa. Further it is found, Indian stock index & the mature stock indices form fractionally cointegrated relationship in the long run with a common fractional, nonstationary component and find that the Johansen method is the best reveal their cointegration relationship. [ABSTRACT FROM AUTHOR]

The paper attempts to analyse the market integration based on the stock market, foreign exchange market and the bullion market. The growth of stock prices was much more than the growth in bullion prices and exchange rate during the period under study. These market are much more stable in the era of economic reforms. No one of these indicators leads this market but BSE Sensex is the most sensitive indicator influenced by all other indicators of these markets. The study shows BSE Sensex and exchange rate has inverse relationship and hence an increase in BSE Sensex decreases the exchange rate. In most other indicator, the short run impact is less and insignificant. From this the conclusion was drawn that these indicators take some rime to adjust with the change in other indicators. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between firm value and foreign ownership of 46 industrial and service publicly owned Jordanian firms listed in the Amman Stock Exchange (ASE) over the period from 1990 to 2000. The study also examines the effect of foreign equity ownership on profitability in order to advance a comprehensive evaluation of value perception. We utilized time-series cross-sectional piecewise regression to analyze the data. Results indicate that the relationship between firm value and foreign ownership in the Jordanian case is non-linear. The firm value piecewise regression results suggest a positive relationship between firm value and the 0 to 1% foreign ownership level. The piecewise regression had also revealed a significant negative relationship between firm value and 5% to 20% ownership levels and a significantly positive relationship between firm value and foreign ownership greater than 20%. [ABSTRACT FROM AUTHOR]

This paper examines the investor's order placement strategy on the Tunis stock exchange which is an electronic order driven market. Using a sample of limit and market orders submitted in the continuous trading session, we examine the determinants of the choice between market and limit orders using a binary logit model. Our empirical findings show that the probability of placing market orders is negatively related to the spread and order size and positively related to previous same-side market orders. However, the order imbalance and the time left until the market closes, affect buyers and sellers' decisions differently. Temporary volatility and depth are negatively related to the probability of placing a buy market order but are not significant for the sell sample. [ABSTRACT FROM AUTHOR]

The paper demonstrates empirically that the stock market valuations are no longer driven solely by the traditional value investment principles. It tests the following propositions; (1) The P/ E ratio companies give superior returns. (2) The average P/E ratio for an industry gives an indication of the overall expectations for that particular segment, (3) The relevance of growth in earnings to the P/ E ratio. The results reported in the study indicate that the low PIE ratio as an indicator does not hold good any more and there is nothing like a long term investment strategy. Since there are "acceptable P/E ranges" for different industries it is not only the past record of the P/E ratio but also the average P/E ratio for the industry, which should be looked into. The use of P/E ratio along with the EPS growth rate can produce the more useful PEG ratio, which is a sound indicator of a company's potential value. [ABSTRACT FROM AUTHOR]

Phenomenal growth has been observed in the Indian Stock Market because of domestic and international investments much to the credit of first and the second phase of reforms in the financial sector. The study tests the volatality of the Indian Stock Markets to foreign institutional flows in equity markets using two indices of the country largest and prominent stock exchnages viz. BSE and NSE. The indices so chosen are S & P CNX Sensex and Nifty. The assessment is made for a period of eleven years from January 2000 to December 2011. Findings indicate significant impact of FII flows on the Indian stock market. It is found that FIIS were net sellers in year 2008 and 2011 and these were the worst years for the stock markets. Fils remained the key mover and shakers of the market especially on account of the global financial crisis. [ABSTRACT FROM AUTHOR]