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.

In recent times, there has been an increasing interest in studying emerging markets like China and India (Friedman, 2005; and Khanna, 2008), one of the main reasons being their blistering economic growth. Even when the global economy was facing a recession, these economies showed positive growth much higher than mature economies. Hence, an understanding of capital markets in these economies has become important, as they have become the favored destinations of investment.

Capital markets thrive on information flows. Markets use information to identify the intrinsic values of the stocks and assets (Mahieu and Bauer, 1998; Li, 2004; He et al., 2006; and Jiang et al., 2006). Advances in technology have made it possible for information to be made available on a real-time basis. This has created an interest in studying intraday movements in the stock market (Shyy and Shen, 1997; Jong and Donders, 1998; Kyröläinen, 2008; and Sivakumar, 2009). Andersen and Bollerslev (1998) argued that the availability of high frequency intraday data could be constructively used to formulate accurate and meaningful inter-daily ex post volatility measurements. In this paper, the intraday usage and assimilation of information in the Bombay Stock Exchange (BSE) has been analyzed using the Generalized Auto Regressive Conditional Heteroskedasticity (GARCH) approach.

Applied Finance Journal, Intraday Information Assimilation, Bombay Stock Exchange, Generalized Auto Regressive Conditional Heteroskedasticity, Global Economy, Capital Markets, Efficient Market Hypothesis, Emerging Market, Castorseed Futures Market, Decision Making, Stock Markets, Investment Implications.