Behavior of Volatility in the Indian Stock Market
with Respect to Some Ecopolitical Factors
--Ranajit Chakrabarty and Asima Sarkar
This paper intends to study and highlight the change in behavior of volatility of Indian stock market on the introduction of derivatives as a financial instrument, the announcement of union budget every year and the Lok Sabha (lower house of the Indian parliament) elections conducted during 1994-2012. Applying cointegration test between the S&P CNX Nifty and the FUTIDX index, it has been noticed that spot and futures markets are cointegrated with each other. Applying a dummy variable, TGARCH model, this paper aims to examine the impact of the above factors on the volatility of Nifty during the year 1994-2012.
© 2016 IUP. All Rights Reserved.
Fiscal Policy and Private Investment in Nigeria:
A Linear and Nonlinear Analysis
--Adegoke Ibrahim Adeleke and Sebil Olalekan Oshota
The empirical results of this study show the importance of the composition of different government expenditure and revenue categories in analyzing the effects of fiscal policy variables on private investment which are often masked when only aggregate fiscal variables are used. When total government revenue and expenditure are regressed on private investment, the results revealed no significant relationships. However, different categories of expenditures and revenues have different impact on private investment. Moreover, relationships between specific fiscal categories and investment appear to be nonlinear. In particular, we show that when total revenue and total expenditure are studied together along with their quadratic terms, total revenue shows a decreasing return and significant negative influence on private investment only in quadratic term while total expenditure reveals an increasing but insignificant positive impact both in levels and quadratic term.
© 2016 IUP. All Rights Reserved.
Derivatives Segment and Cash Segment in India:
A Comparative Performance Analysis
--Soheli Ghose and Adarsh Rathi
Financial derivatives, from the economic point of view, are cash flows that are conditionally stochastic and discounted to present value. The market risk inherent in the underlying asset is attached to the financial derivatives through contractual agreements and hence can be traded separately. In the last decade, the derivatives market in India has grown astronomically. This paper analyzes whether the growth of the derivatives segment has overtaken the cash market in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The paper also analyzes the Pearson’s correlation between the Turnover (T/O) of BSE cash segment and derivatives segment, stock futures, index futures, index call options and index put options, stock call options and stock put options. The results reveal that derivatives do indeed facilitate transfer of risk and that this segment has gradually overtaken the cash segment in terms of T/O and that there is a correlation between the above-mentioned parameters.
© 2016 IUP. All Rights Reserved.
Returns from Financial Statement Analysis Among
Low Book-to-Market Stocks: Evidence from India
--Navdeep Aggarwal and Mohit Gupta
The motivation behind this paper was to see if financial statement analysis could be employed by investors to design portfolios of low book-to-market stocks that could help them earn excess returns in the Indian context. Using a modified framework from Mohanram (2005), which employs a G_SCORE, capable of separating ex post winners from losers among low book-to-market companies, and portfolio formation on the basis of the G_SCORE, we find convincing evidence that financial statement analysis can help investors form profitable portfolios among low book-to-market stocks. We show that portfolios with high G_SCORE (6 to 7) provide outstanding returns both on absolute and riskadjusted basis and far outperform the markets. At the same time, portfolios with low G_SCORE (0 to 3) offer very poor returns and always underperform the markets on both absolute and risk-adjusted returns. Thus a growth investor could shift his distribution of returns rightwards by investing in portfolios of only high G_SCORE stocks; simultaneously shorting low G_SCORE portfolios would further amplify the returns.
© 2016 IUP. All Rights Reserved.
Cyclical Behavior Analysis of Indian Market
Using H-P Filter and Spectral Techniques
--Atanu Das
Time Series (TS) data often exhibits a cyclical pattern. Security indices time series data is not an exception to that. Three forms of Indian security indices data are studied here for characterization of business cycles. These are of values, returns, and moving variance series of selected sectorial National Stock Exchange (NSE) indices together with the gross indices Nifty and Sensex by considering daily movements. The datasets are analyzed by Fast Fourier Transform (FFT), Short Time Fourier Transform (STFT) and wavelet-based methods with and without Hodrick and Prescott (H-P) filtering as pre-processing. The FFT analysis shows that most of the indices show business cycles of approximately quarterly duration, whereas wavelet studies identified some structural breaks in some of the considered datasets.
© 2016 IUP. All Rights Reserved.
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