Abstract
This study attempts to examine the adaptive market hypothesis and evolving predictability of stock returns using four decades of daily data from the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in India. The recent developed automatic portmanteau ratio (AVR) and wild bootstrap automatic variance ratio (WAVR) test are used for analysis. We also estimate both the AVR and WAVR statistics in the rolling window framework to examine evolving predictability. The results revealed that BSE and NSE are informationally inefficient in the weak-form. The results of rolling window analysis suggested that the degree of predictable patterns evolves over the period due to global and regional economic and non-economic events. Further, the study compare which stock market is more efficient and found that NSE is more efficient than BSE. The findings of this study provide essential inputs to investors on trading strategies in dynamic economic situations and policymakers to formulate an appropriate policy that can make the Indian stock markets efficient.
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Notes
In a major move, central government of India announces to merge of 10 public sector banks into four entity. All of these banks have the negative growth rate in the NSE. For instance, Oriental Bank of Commerce and United Bank of India merged with Punjab National Bank; Canara Bank and Syndicate Bank merged into one entity; Union Bank of India, Andhra Bank and Corporation Bank amalgamated into one entity; Indian Bank and Allahabad Bank merged into one entity. The source collected from https://economictimes.indiatimes.com/industry/banking/finance/banking/nirmala-sitharaman-pnb-obc-united-bank-to-be-merged/articleshow/70909247.cms?from=mdr.
The growth of the Indian economy fall to 5% which is six years low. The figure access on 2nd of November 2019 from the Bloomberg website: https://www.bloombergquint.com/economy-finance/business/india-gdp-growth-crashes-to-six-year-low-of-5-in-april-june-quarter.
The figures are obtained from the world bank data base. Market capitalisation indicates the per-share price times total share outstanding of the listed domestic companies.
We also obtained the results in 200, 300 and 400 window size and employed the Kruskal–Wallis test to check the sensitivity to our main results due to the change in window size. The test result indicate that the degree of predictability in the price pattern is time-dependent. All the results can be available from the authors upon request.
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Bhuyan, B., Patra, S. & Bhuian, R.K. Market Adaptability and Evolving Predictability of Stock Returns: An Evidence from India. Asia-Pac Financ Markets 27, 605–619 (2020). https://doi.org/10.1007/s10690-020-09308-2
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DOI: https://doi.org/10.1007/s10690-020-09308-2