Price Momentum Strategies: Evidences from Indian Equity Market

--Martin Bernard and Malabika Deo

In this paper, we examine the possibility of price momentum strategy and the profitability thereof in the Indian equity market, which is one of the most promising emerging markets. We also analyze the magnitude of contribution made by losers’ and winners’ portfolios to momentum profit in the Indian context. The results show a strong presence of momentum phenomenon in the Indian context and also winners’ portfolio contributes more to momentum return.

© 2015 IUP. All Rights Reserved.

Exchange Rate Volatility Estimation Using GARCH Models, with Special Reference to Indian Rupee Against World Currencies

--Krishna Murari

This study is an attempt to estimate the dynamics (volatility) of Indian rupee instability against four major world currencies, i.e., US dollar, pound sterling, euro and Japanese yen, using 3,340 daily observations over a period of 13 years from January 3, 2000 to September 30, 2013. This paper uses the Generalized Autoregressive Conditional Heteroskedastic (GARCH) models to estimate volatility (conditional variance) in the daily log rupee value. The models include both symmetric and asymmetric that capture the most common stylized facts about rupee exchange returns such as volatility clustering and leverage effect. It is evident from the findings that asymmetric models are superior to symmetric models in providing a better fit for the exchange rate volatility because of leverage effect.

© 2015 IUP. All Rights Reserved.

Investor Herding Behavior and Its Effect on Stock Market Boom-Bust Cycles

--Haifa Hammami and Younes Boujelbene

In this study, we test for the presence of investor herding behavior in the Tunisian stock market. Further, we explore the explanatory factors of the occurrence of the probability of stock market booms and busts by combining herding behavior of investors and economic and financial fundamentals. We find that investors exhibit different levels of herding behavior—herding strongly exists in both booms and busts of stock market. Our results show that herding behavior contributes to an increase in the probability of stock market booms. In addition, the economic and financial fundamentals lead to the emergence of Tunisian stock market boom-bust cycles.

© 2015 IUP. All Rights Reserved.

Price Discovery and Volatility Spillover in the Agricultural Commodity Futures Market in India

--M Ajoy Kumar and M R Shollapur

In 2002, when the government permitted futures trading on most of the commodities and allowed setting up of national level exchanges, trading in agricultural commodities grew very fast with soy oil, soy bean, mustard seed and chana constituting the major share in 2013. The current study attempts to analyze the price behavior in terms of returns as well as volatility between the spot and futures markets for these four commodities. The study uses a combination of VECM and EGARCH models to analyze the data. The study finds existence of long-term equilibrium relationship between the futures and spot prices, with the futures leading the spot. In the short run, futures returns seem to have a stronger impact on the spot returns in most of the commodities.

© 2015 IUP. All Rights Reserved.

Lead-Lag Relationship and Price Discovery in Indian Commodity Derivatives and Spot Market: An Example of Pepper

--G Vasantha and T Mallikarjunappa

This study examines the lead-lag relationship and price discovery process between spot and futures market of pepper in India by employing Johansen’s cointegration test and the bivariate VECM-EGARCH(1, 1) models. Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests are used to check the stationarity of the price series. The study finds that spot market absorbs the information faster than futures market, and therefore, the former plays a significant role in the price discovery process.

© 2015 IUP. All Rights Reserved.

Underpricing, Firm’s Accounting Information and Grading of IPOs: An Empirical Analysis of Indian Private Sector

--Poonam Rani and K P Kaushik

The study investigates the impact of pre-Initial Public Offer (IPO) accounting information and grade of equity instruments on underpricing of IPOs. A sample of 76 book built IPOs from National Stock Exchange (NSE) has been considered for the study. Using multiple regression technique, it has been noticed that out of current ratio, debt to equity ratio, debt to total assets ratio, return on assets and return on equity ratios, two ratios, namely, return on assets and debt to total assets, have significant impact on underpricing. In addition, qualitative certification (grade of equity instruments) has no significant impact on underpricing. The study has also highlighted the importance of a sound pre- IPO financial performance because when for the first time equity instruments of a corporate entity is traded in secondary market, the same makes an investor pay more.

© 2015 IUP. All Rights Reserved.