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Impact of Sample Size on the Distribution of Stock Returns: An Investigation
of Nifty and Sensex
-- Gaurav Agrawal
The purpose of this study is to test the impact of the sample size on the distributional characteristic of the stock returns of Nifty
and Sensex. Many statistical tools are used by financial analysts and academicians for their analyses and researches under the
assumption that stock returns are normally distributed for all kinds of sample size. Failure of the underlying assumption of normality can
mislead the inferences. This study shows that sample size can distort the normality assumption of the stock returns. The study is based
on statistical analysis and normality tests, such as Kolmogorov-Smirnov (K-S), Anderson-Darling (A-D), Jarque-Bera (J-B), the
results of which indicate that large sample size daily stock returns do not follow the normal distribution, while small sample size monthly
stock returns follow the normal distribution.
© 2009 IUP. All Rights Reserved.
Determinants of IPO Underpricing
in the National Stock Exchange of India
-- Alok Pande and R Vaidyanathan
The National Stock Exchange (NSE) is India's first fully demutualized stock exchange. It is also the largest exchange in India in terms
of volumes in both equity and derivatives segments. Previous studies on Initial Public Offerings (IPOs) in India have been
largely confined to the Bombay Stock Exchange (BSE). This study looks at the pricing of IPOs in the NSE, in particular, it seeks to
empirically explain the first day underpricing in terms of the demand generated during the book building of an issue, the listing delay between
the closure of the book building and the first day listing of the issue, and the money spent on the marketing of the IPOs by the firms. It
also seeks to understand any emerging pattern in Indian IPO market with reference to the previous studies. Moreover, it seeks to find
the Post-IPO returns for one month in the NSE. The results suggest that the demand generated for an issue during book building and
the listing delay positively impact the first day underpricing, whereas the effect of money spent on the marketing of the IPO is
insignificant. It is also found that in consonance with the extant literature, the Post-IPO performance in one month after the listing for the firms
under study, is negative.
© 2009 IUP. All Rights Reserved.
Selection of Value-at-Risk Model and Management
of Risk Using Information Transmission
-- Rajesh P N
Major crises in many of the international financial institutions in the 1990s, due to adverse market moves and poor internal
management, raised many questions about the practice of risk management. The need for a foolproof system for measuring risk was felt
by practitioners of financial profession. The concept of Value-at-Risk (VaR) was the academicians' answer to this challenge. This
study analyzes the performance of VaR techniques by subjecting their prediction to elaborate back testing. The analysis was carried out in
the background of Indian capital market, using the Nifty and the Nifty Junior daily returns as the data. The study used
Garch and Tgarch models and found that the TgarcH model performed better than the
Garch model in predicting VaR. Further, a Vector Autoregression (VAR) framework applied to the two indices showed that Nifty, the broader of the two markets, led in the case
of generation of risk in the system.
© 2009 IUP. All Rights Reserved.
Linkage Between Stock Market and Manufacturing Sector in India: A Time Series Analysis
-- Nusrat Ahmad
The paper attempts to understand the interlinkage and the causal relationship between the stock market and the manufacturing sector
in India during the period July 1997 to March 2006 using monthly data of BSE Sensex and Index of Industrial Production (IIP). While
the Engel-Granger cointegration test is applied to measure the long-term relationship between the two variables, the Granger causality
test is used to check the short-term causal relationship. The analyses reveal that there is a long-term relationship between the stock
market and the manufacturing sector, and in the short-term, causality runs from BSE Sensex to IIP.
© 2009 IUP. All Rights Reserved.
Calendar Anomalies in National Stock Exchange Indices
-- M Selvarani and Leena Jenefa
This paper examines the calendar anomalies in the NSE indices by analyzing the trends in annual returns and daily returns for
the period 2002-07. A set of parametric and nonparametric tests are employed to test the equality of mean returns and standard
deviations of the returns. The findings of the mean returns in the NSE indices show that there is a strong evidence of April and January effect.
After the introduction of the rolling settlement, Friday has become significant. As far as day effect is concerned, Tuesday effect is
more prevalent than Monday effect.
© 2009 IUP. All Rights Reserved.
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January '09 
