Intraday Information Assimilation in the Bombay Stock Exchange: A Garch Approach

-- N Sivakumar

Stock markets use information to determine the intrinsic values of assets and stocks. Markets take time to assimilate information and use it efficiently. This paper attempts to analyze the intraday information usage and assimilation patterns in the Bombay Stock Exchange (BSE) using the Generalized Auto Regressive Conditional Heteroskedasticity (GARCH) approach. Using more than 53,000 time series observations of the BSE Sensex, the paper has empirically tested the information usage and assimilation in the BSE and found that during very short intervals of five minutes, markets give preference to new information. The markets then increasingly assimilate existing information and take around half-hour to assimilate the information adequately. The markets then once again start seeking new information for decision making.

© 2010 IUP. All Rights Reserved.

Evidence on the Day-of-the-Week Effect and Asymmetric Behavior in the Bombay Stock Exchange

-- Ricky Chee-Jiun Chia and Venus Khim-Sen Liew

This study examines the existence of day-of-the-week effect and asymmetrical market behavior in the Bombay Stock Exchange (BSE) over the pre-9/11 and post-9/11 sub-periods. This study found the existence of significant positive Monday effect and negative Friday effect during the pre-9/11 sub-period. Further analysis using the EGARCH and EGARCH-M models revealed the asymmetrical market reaction to the positive and negative news in BSE. Moreover, significant day-of-the-week effect is found present in BSE regardless of sub-periods, after controlling for time-varying variance and asymmetrical market behavior.

© 2010 IUP. All Rights Reserved.

Impact of Risk Disclosure in the Prospectus on Valuation and Initial Returns of Initial Public Offerings in Malaysia

-- John Murugesu and A Solucis Santhapparaj

Drawing upon risk-return and signaling literature, this paper tests the relationship between Initial Public Offering (IPO) risk disclosed in the prospectus and its offer price and initial market returns. Based on 210 samples of IPOs offered in Malaysian stock market during the period 1999-2004, weighted least-square regression analysis (book value of the company after the IPO as weight) has been applied. The results indicate that the prospectus does provide risk information that reflects offer price and initial market returns.

© 2010 IUP. All Rights Reserved.

Security Speed of Adjustment and Market Quality: A Case of National Stock Exchange of India

-- Rajesh Acharya H

This paper examines the impact of changes in market structure on market quality through security speed of adjustment coefficients, by employing ARMA model. The average result of cross-section of companies did not show any systematic pattern in terms of persistent underreaction or overreaction. The study did not find significant difference in the speed of adjustment of small and large capitalization stocks.

© 2010 IUP. All Rights Reserved.

Reading Habit and Household Investment in Risky Assets

-- R R Rajamohan

In India, the household sector contributes about 80% of Gross Domestic Savings (GDS). The sector's investments are predominant in fixed income bearing instruments or physical assets, and less predominant in financial assets like shares and mutual funds. This paper makes an attempt to analyze the determinants of household portfolio, particularly the ownership of risky assets, using a sample of 345 households from Coimbatore city. The study finds that reading habit and age are positively and significantly related with the ownership of risky assets. There is thus a need for policy intervention to improve the financial knowledge level of the households through appropriate educational programs.

© 2010 IUP. All Rights Reserved.

Is Options Open Interest Information Useful in Trading? Evidence from Indian Equity Options Market

-- Navdeep Aggarwal

In this paper, we study the relevance of stock options open interest in conveying information about the future price movements in the underlying stocks. This investigation has been carried out by using daily closing data of 26 stocks in the National Stock Exchange (NSE) derivatives segment for the period May 2007 to October 2008. The result proves that stock options open interest does contain valuable information about future price movements in the underlying stocks.

© 2010 IUP. All Rights Reserved.