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The paper attempts to assess the interlinkages among the equity markets of SAARC nations by examining the degree of co-movement or association in the long run between the selected subject markets. The time-series data is also tested to examine the impact of shock transmission from one market to another (to-and-fro). The timeseries is tested for stationarity using unit root tests. Further, the paper aims at determining the long-term interrelatedness between four member countries of SAARC--India, Pakistan, Sri Lanka and Bangladesh--using the Johansen cointegration methodology. Further, the impact of shocks from one stock market to another is studied using Variance Decomposition (VD) and Impulse Response Function (IRF). The daily closing prices of principal stock markets are used for empirical investigation for the period April 1, 2013 to December 31, 2019. Results from the study propose that no interrelatedness and cointegration exist among the equity markets of the four countries in the long run. Empirical evidence from the variance decomposition and IRF further reconfirms that the level of integration among the SAARC region is low. Overall, the inferences from the study state that each stock market is influenced by price fluctuations in its own market. Also, due to less stringent regulatory environment of the studied stock markets, accept India, there will be opportunity for QIBs to generate value. [ABSTRACT FROM AUTHOR] more...

This paper aims to investigate the effect of political instability and terrorism on Tunisian financial market. Estimation of Power ARCH model between 2005 and 2015 provides support for the negative effect of informal political instability (assassinations and revolution), formal political instability (major government crises and a number of major constitutional changes) and terrorism on the Tunisian financial market. Moreover, the results highlight assassination as a source of political risk, as it has more significant and greater effect on stock market returns as compared to other sources of political instability. Thus, this result is very important for government authorities who should create a security system for all people and in particular for the members of the political parties to ensure the stability and performance of the Tunisian financial market. [ABSTRACT FROM AUTHOR] more...

The purpose of this paper is to estimate the effectiveness of technical trading strategies and examine the extent to which trading profitability using technical analysis indicators explains the 'risk premium' or 'risk compensation' for investing in equity markets as against assets that are relatively risk-free using multiple regression analysis. The technical indicators selected for the analysis are Bollinger bands (volatility indicator), moving average (trend indicator), Relative Strength Index (momentum indicator), and Elliot wave theory (mass psychology indicator). The paper finds evidence for risk premium being explained by technical indicators. The technical trading strategy based on trend, momentum, volatility indicators, including the Elliot wave theory has the ability to explain the excess return of a stock. The findings have important implications for traders and practitioners. A positive relationship implies that technical indicators can be explored while evaluating strategies for investment. So, it suggests that traders, retail investors and fund managers, while evaluating portfolios, can rely on technical indicators-based trading strategies other than fundamental analysis. [ABSTRACT FROM AUTHOR] more...

The link between real and financial markets is a perennial source of debate and research in macro-finance. The issue resurfaces time and again in different forms: Does the functioning of financial systems have any effect on real activity (commodity market)? What is the possible relation between 'financial' claims and 'real' claims? These questions have gained tremendous currency once again after the subprime crisis and the recent 'great recession' in the Euro zone. The purpose of this paper is to analyze how the 'virtual' economy, captured through the stock market (because stock markets are an integral part of contemporary financial systems), interacts with the 'real' economy producing goods and services. The paper tries to critically understand the short-run interconnections between the expansion of aggregate demand through wealth effect generated by stock market and macroeconomic stability. The paper finds that in a dynamic IS-LM type model with wealth effect, there is a possibility of multiple equilibria and some of them are not stable. Given monetary authority's emphasis on reducing financial market instability, a stabilization program exercised through monetary policy may fail to work when wealth effect is significant. Instead, redistribution of income through tax may turn out to be more effective. [ABSTRACT FROM AUTHOR] more...

Using monthly data on money, short-term credit, foreign exchange, government securities, long-term debt, futures, and real estate market instruments' returns, the paper examines the financial-markets' integration (i.e., long-term relationship or cointegration) within and across the markets in India for the sample period April 2006 to March 2020 by employing the autoregressive distributed lag methodology. In terms of within the markets, the study found that there exists financial integration only in money, short-term, government and forex markets. On the other hand, in terms of across the markets, it is found that all the money market and short-term credit market instruments other than IMF lending rate and bank rate are cointegrated with government securities, long-term debt, futures, foreign exchange and real estate markets. Equity market is cointegrated only with money, short-term credit and futures markets. Similarly, 10-year government security is cointegrated with money, shortterm credit and forex markets. The equity futures market is cointegrated with money, short-term credit and long-term debt markets only, while the corporate bond market is cointegrated with all the markets other than futures. On the other hand, neither the commodity futures market nor the real-estate market is cointegrated with any other markets. The equilibrium adjustment speed is not uniform across the markets and in general it is lower within the markets compared to across the markets. [ABSTRACT FROM AUTHOR] more...

This paper examines the relationship between BSE Sensex and three other developed markets in the frequency domain. Cross-spectral methods, which are important in discovering and interpreting the relationships between economic variables, are used to analyze the relationships between different price series. Cross-spectral methods, developed using Fourier techniques, give valuable information regarding the correlation structure in the frequency domain. This paper applies these methods to study the lead-lag relationship between BSE Sensex and other international markets. The results show no significant co-movement of Indian stock prices with developed market prices at lower frequencies; and in the long run, the developed stock markets seem to lead Indian market. However, in the short run, some evidence of behavioral similarities is observed. [ABSTRACT FROM AUTHOR] more...

This paper examines the volatility pattern in Indian stock markets during the time period January 1, 2011 to March 31, 2014 using the daily closing prices of two stock indices, S&P BSE Sensex and CNX Nifty. This paper uses asymmetric GARCH models like Exponential GARCH (EGARCH) and Threshold GARCH (TGARCH) to explain the volatility. Considering the minimum values of Akaike Information Criterion (AIC) and Bayesian Information Criterion (BIC), TGARCH model is found to be a superior model for return volatility over EGARCH. The findings suggest that there is no volatility persistence as well as leverage effect in the data during the period under consideration. [ABSTRACT FROM AUTHOR] more...

This paper empirically investigates the behavior of stock returns of two premier stock markets in India, namely, the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Specifically, the paper seeks to examine whether the security returns in these two markets follow Random Walk Hypothesis (RWH). Towards this end, data on major indexes during the period June 2, 1997 to February 29, 2009 are analyzed using variance ratio and autocorrelation tests. The results are inconclusive as both the tests provide mixed results. [ABSTRACT FROM AUTHOR] more...

Algorithmic trading has made a paradigm shift in Indian stock market. Popularity of algorithmic trading is gaining momentum among Indian traders and investors due to technological advancement. The objective of this paper is to apply Interpretive Structural Modeling (ISM) to develop a hierarchical structure among the key barriers of algorithmic trading in India. 11 barriers have been identified through the literature review which are then validated for significance, using a structured questionnaire, from the experts. ISM approach has been utilized to rank the barriers and analyze their mutual interactions. Subsequently, MICMAC analysis was conducted to reveal dependence and driving power of these barriers. MICMAC analysis also elicits the relative importance and interdependence between these barriers from the Indian context. A list of relevant barriers significantly helps the practitioners to take right decision while adopting algorithmic trading. The study has importance in the Indian context due to scarcity of research in this area. [ABSTRACT FROM AUTHOR] more...

This paper examines both the linear and nonlinear causal relationship between crude oil price changes and stock market returns in India. In particular, the study applies alternative unit root tests with and without structural break to ascertain the shifts in crude oil price changes and stock market returns for the period 1991:01 to 2013:08. The linear and nonlinear causality tests are conducted using the standard Vector Autoregression (VAR) and the Diks and Panchenko (2006) frameworks respectively. The results from the unit root tests indicate that crude oil price changes and stock market returns are stationary. The results from the standard VAR model provide evidence of unidirectional causality from stock returns to crude oil price changes. The results of the Diks-Panchenko causality test, however, support nonlinear bidirectional causality between the two variables. [ABSTRACT FROM AUTHOR] more...

This research paper examines the price behavior of equity shares of companies that indulge in insider trading of their securities. Further, it also analyzes whether reporting delays and industry differences have any impact on the magnitude of abnormal returns. A sample of 1,101 insider transactions by insiders of Bombay Stock Exchange (BSE) listed companies for the period April 1, 2009-March 31, 2013 has been utilized for analysis purpose, which includes 524 buy transactions and 577 sell transactions. The impact of insider transactions on share prices is ascertained by examining the abnormal returns on the date of transaction by using the market model. The findings of the study reveal that insiders are able to earn abnormal returns during one month post the event, whereas in the long run, the profits almost disappear. Time duration of reporting trades to stock exchange and industry differences impact the direction and magnitude of stock market returns. [ABSTRACT FROM AUTHOR] more...

Empirical studies show that as economies progress, the structure of the financial system also changes. The aim of this study, covering the period 1991 to 2019, in the context of India, is to analyze the structural changes in the financial system and its relationship with economic growth. Real Gross Domestic Product (GDP) at factor cost is taken as the proxy for economic growth. Credit extended by banks is taken as a variable for bank-based financial development. For market-based financial development, four variables are considered, namely, Bombay Stock Exchange (BSE) market cap, BSE equity turnover, Assets Under Management (AUM) of mutual funds and funds mobilized through Initial Public Offers (IPO). In addition, four control variables are considered: government expenditure, exports, call rate and World GDP (WGDP) growth rate. Six Autoregressive Distributed Lag (ARDL) models are estimated for capturing the short- and long-run relationships. The findings of the study reveal both short- and long-run association of economic growth with market capitalization, government expenditure, call rate and world growth rate. Bank credit has a long-run causal relationship with economic growth. The findings highlight the role of bank credit and of financial development in the long-run economic growth. [ABSTRACT FROM AUTHOR] more...

This paper is an attempt to model the volatility of the equity data of the two Indian stock markets. The study found volatility clustering in the daily returns of indices. Different GARCH models were estimated for various indices of NSE and BSE, the two premier Indian stock exchanges. GARCH(1, 1) with MA(1) in the mean equation was found to fit better than the other models. The models were used to test the spillover effect between the benchmark indices of the two Indian markets, to test for the possibility of volatility transmission within a country and between the two exchanges. The study found volatility transmission between the two markets. [ABSTRACT FROM AUTHOR] more...

In 2016, the Indian government demonetized the 500 and 1,000 notes, the two highest denomination currencies in the system. This was a rare event that affected the entire Indian economy. The present study aims to find out the impact of the demonetization on the stock market by applying the event study methodology on 19 sectoral indices of Bombay Stock Exchange. The period of study spans from April 1, 2015 to November 24, 2016. The estimation period is from April 1, 2015 to September 30, 2016. The Cumulative Abnormal Returns (CAR) are calculated for 25 trading days before the event day to 10 days after it, with November 9, 2016 considered as the event date. The results of the study show that demonetization had a positive impact on indices like the public sector enterprise (CPSE), power (SIPOWE), infrastructure (Infra), banks (SIBANKEX), healthcare (SI0800), metals (SI1200) and utilities (SPBSUTIP), and negative impact on indices like auto (SI1900), FMCG (SI0600), consumer discretionary goods (SPBSCDIP), realty (SIREAL), basic materials (SPBSBMIP), and tech (SIBTEC), while capital goods (BISO200), oil and gas (SI1400), energy (SPBSENIP), industrials (SPBSIDIP), and telecom (SPBSTLIP) indices were not affected. The findings also reveal that there is no leak about the event to the market as the CAR for the pre-event period is not significant for any sector. [ABSTRACT FROM AUTHOR] more...

The study seeks to investigate how market participants behave, with special reference to herd behavior wherein investors imitate the investment patterns of their fellow investors. It further explores the magnitude of such behavior not only during normal circumstances, but also during severe upswings and intense downturns, with special focus on the Indian stock market. Two most extensively time-honored models given by Christie and Huang (1995) and Chang et al. (2000) have been applied to examine the herding component by scrutinizing the wide dispersions of the security returns as regards the standard market model on a large dataset of monthly returns of BSE 500 index for a period of 18 years, i.e., from April, 2000 to March, 2018. The study found absence of herding behavior in the Indian stock market. [ABSTRACT FROM AUTHOR] more...

This study is an attempt to evaluate and analyze the relationship between Foreign Portfolio Investors (FPIs) and the Indian stock market returns. With the stable economy, better growth prospects, liberal government policies and many more profitable opportunities, India has become a hot destination for FPI investments. Thus there is a need to study the impact of these investments on the market returns. Daily data of foreign net investment and Nifty returns, for the period starting from April 2004 to December 2015, has been used for evaluating the presence of feedback trading among the foreign investors. Vector autoregression and Granger causality have been used to test the presence of feedback trading hypothesis and establish the cause and effect relationship among the variables. The results suggest that FPIs are influenced by the Nifty returns but the opposite relationship does not hold. Also it is found that feedback trading is present in the short run with FPI getting influenced even by the Nifty's last 12 days returns. As the frequency of the data is changed to monthly, the feedback trading hypothesis does not hold true. In other words, it can be said that FPIs' net investment is positively influenced by Nifty returns. [ABSTRACT FROM AUTHOR] more...

This study identifies the impact of three natural disasters on cointegrating relationship among selected world stock market indices. The study further suggests the best international diversification strategy in case of the occurrence of an extreme event from the perspective of an Indian investor. A vast amount of research suggests that international portfolio diversification helps to spread the risk of any adversity occurring in a particular country as the correlations among stocks in various countries are lower as compared to local securities. But the disagreement nevertheless is that in a number of instances, diversifying internationally might not be effective. To fill this research gap, the study employs Johansen multivariate cointegration test to evaluate change in the financial linkages between selected stock market indices during the pre- and post-one year event period for three events to include China Earthquake of 2008, Japan earthquake and tsunami of 2011 and the US Hurricane Sandy of 2012. The study further compares performance of different portfolio diversification strategies, viz., Naive 1/N portfolio construction technique, Markowitz modern portfolio theory and cointegration-based portfolio construction method with the aid of Sharpe's ratio. The study finds that with the help of cointegration analysis, effective portfolio selection can be done to seek maximum diversification benefit. [ABSTRACT FROM AUTHOR] more...

The study investigates the impact of derivatives listing on stock prices in the Indian capital markets. Significant positive abnormal return around derivative listing is found lending support to the market completion hypothesis. The results support the evidence obtained in the US, the UK and other developed countries that introduction of derivatives increases the opportunity set to invest in the markets and improves the overall efficiency of the capital markets. [ABSTRACT FROM AUTHOR] more...

The study aims at observing the impact of listing 106 Single Stock Futures (SSFs) and 31 Single Stock Options (SSOs) on the market value of their respective underlying stocks using event study methodology. The study defines event in two ways: (a) the day on which NSE releases the circular regarding the listing of stocks on F&O segment; and (b) the actual listing day. To test the statistical significance of abnormal returns which are attributed to the event under consideration, both parametric and nonparametric tests are used. There is evidence of positive response from the investors to the announcement and also listing of SSFs, supporting the market completion hypothesis. However, there is no such evidence observed when it comes to options. At times, there is evidence of negative reaction, probably, it is due to their lack of confidence in the probable success of options market. American options which were introduced earlier have been unsuccessful due to illiquidity and replaced with European style of options. [ABSTRACT FROM AUTHOR] more...

This study examines the time-varying cointegration between the S&P 500 index and real GDP of US using quarterly data for the sample period from 1970Q1 to 2013Q3. The findings reveal that the cointegration relationship between the variables breaks down during the financial crisis period, which is not captured by the full sample cointegration test. Further, using Enders and Siklos (2001) threshold cointegration test, the study finds evidence for asymmetric adjustment in the error correction with different adjustment in pre- and post-crisis periods. The empirical evidence suggests that a combination of these two tests can be used as a simple indicator to identify future crisis. [ABSTRACT FROM AUTHOR] more...

Prior research in Indian equity market has failed to fully document the well-known influences of size and book-to-market effects that have been evidenced in other markets. So, the question remains as to whether value premium exists in India or whether it has simply failed to be adequately explored. Moreover, no robustness check has been performed on this. This study uses buy-and-hold strategy for a short span of one quarter to a relatively longer span of two years over the 10-year period from June 2003 to September 2013 and finds no evidence of value premium in the Indian market. This explains the presence of an anomaly as the results are contrary to what have been found in other countries. [ABSTRACT FROM AUTHOR] more...

The study investigates volatility in the stock markets of India and Canada using daily closing price data for the period from January 2002 to July 2009. Various volatility and diagnostic tests suggest certain stylized facts about volatility like volatility clustering and mean reverting behavior. ARCH-LM test suggests the presence of conditional heteroscedasticity in both the stock markets. The findings reveal that the GARCH(1, 1) model successfully captures the time-varying volatility in the stock markets. The analysis suggests persistence of volatility in the stock markets. However, the persistence of volatility in Canadian stock market is marginally more than that of Indian stock market. [ABSTRACT FROM AUTHOR] more...