Econometrics

Download Momentum Trading on the Indian Stock Market by Gagari Chakrabarti, Chitrakalpa Sen PDF

By Gagari Chakrabarti, Chitrakalpa Sen

This research is an exploration of the Indian inventory marketplace, targeting the potential presence of momentum buying and selling. something, besides the fact that, will be famous. whereas it truly is actual that momentum buying and selling, which has a tendency to generate speculative bubbles, may end up in a monetary industry crash, its nature against this may depend upon the character of the economic system itself. The learn, whereas exploring the presence and nature of momentum buying and selling at the Indian inventory marketplace in recent times, seeks to narrate it to major structural breaks within the Indian or international economic system. To be specific, it outlines a possible correlation among the instability within the inventory industry and the speculative buying and selling out there, exploring the query of if it is human psychology that drives monetary markets. within the technique, the alternative of an important structural holiday has been noticeable: the worldwide monetary meltdown of 2007-2008 – a concern that has frequently been often called the worst ever because the crash of 1929. whereas studying the character of momentum buying and selling at the Indian inventory industry in regards to the monetary drawback of 2007-08, the examine takes into consideration significant representatives of the marketplace, the BSE (Bombay inventory Index) and NSE (National inventory Index), for the interval 2005 to 2012. This learn seeks to respond to a couple of vital questions. to start with, it attempts to unveil the underlying constitution of the marketplace. In doing so, it examines the next matters: (i) What was once the latent constitution of the Indian inventory marketplace best as much as the hindrance of 2007-08? Does the constitution supply insights into designing ecocnomic buying and selling techniques? (ii) Is it attainable to build a ecocnomic portfolio at the Indian inventory marketplace? (iii) Is there any ecocnomic buying and selling process at the Indian inventory marketplace? whereas exploring those matters, the examine delves deeper, breaking the entire interval down into sub-periods, ahead of the hindrance of 2008 and after the drawback. the aim of this department is to figure out even if there was any discernible switch available in the market constitution because the surprise.

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Example text

Such trends could skillfully be used by investors to design profit making strategies to beat the market. Let us now consider the other stock exchange, namely the NSE and explore whether the movements and other characteristics in the NSE resemble the trends in BSE. While exploring the issues, we shall be following the same methodologies that were followed in the previous sections. Hence, we are not repeating the methodology, but reporting the results only focusing on the analytical discussion. 6 Trends and Latent Structure in Indian Stock Market: National Stock Exchange 1.

Such series are best analyzed by an appropriate GARCH family model and risk for such a series is proxied best by its conditional variance. The two series are modeled best by simple GARCH model of order (1, 1). The two series are hence not characterized by asymmetric response of volatility toward positive and negative announcements in the market. There is no evidence that the market or the sectors reacts more toward the negative news than toward the good news. The sectoral return as a whole is characterized by significant presence of ARCH (or, the news) effect and GARCH (the own past volatility) impacts.

936 10 5 01-Jun-12 01-Feb-12 01-Oct-11 01-Jun-11 01-Feb-11 01-Oct-10 01-Jun-10 01-Feb-10 01-Oct-09 01-Jun-09 01-Oct-08 01-Feb-09 01-Jun-08 -5 01-Feb-08 0 -10 The presence of a single structure implies the presence of a single dominant trend in the market even in the post-crisis period. All the sectors and the market move in similar fashion and direction (as reflected in their positive loadings on the factor). The indexes are highly correlated and together they reflect a distinct and broad market trend.

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