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Variance Ratio Test, ARIMA Model and Stock Price Behaviour

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Risk-Return Relationship and Portfolio Management

Part of the book series: India Studies in Business and Economics ((ISBE))

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Abstract

This study investigates the stock price behaviour of Indian stock market using BSE Sensex as well as 30 individual underlying shares included in the Sensex. Variance Ratio test for the market index suggests dependency of the aggregate market series, which violates the assumption of Random Walk Hypothesis (RWH). However, the test results manifest mixed behaviour of return generating process for individual companies. The study has also developed one forecasting model for the market index using the ARIMA process. The AR (9) model has been found to be an appropriate model for forecasting future returns to the Sensex, the validity of which is of course, subject to real-world experiments.

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This chapter draws from the author’s previous published work (Dhankar & Chakraborty, 2005), co-authored with Madhumita Chakraborty, Faculty of Management Studies, University of Delhi, New Delhi-110021; originally published in IUP Journal of Applied Finance, February 2005. Copyright © 2005 IUP Publication, Hyderabad. All rights reserved. Reproduced with the permission of the copyright holders and the publishers, MNO.

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Author information

Authors and Affiliations

  1. Faculty of Management Studies (FMS), University of Delhi, New Delhi, Delhi, India

    Raj S. Dhankar

Authors
  1. Raj S. Dhankar
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Corresponding author

Correspondence to Raj S. Dhankar .

Appendix 1: Names of 30 Companies Used in the Study

Appendix 1: Names of 30 Companies Used in the Study

Serial No.

Name

Time period

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

ACC

Bajaj Auto Ltd.

BHEL

BSES

Castrol

Cipla

Colgate

Dr. Reddy’s Lab

Glaxosmith Pharm

Grasim Inds.

Gujarat Ambuja Cem

HINDALCO

HILL

HPCL

ICICI Bank

Infosys Technologies

ITC

L&T

M&M

MTNL

Nestle

NIIT

Ranbaxy Laboratories

Reliance Industries

Reliance Petroleum

Satyam Computers

SBI

TELCO

TISCO

Zee Telefilms

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

October 12, 1992–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

September 11, 1992–December 31, 2001

January 1, 1991–December 31, 2001

June 14, 1993–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

April 13, 1993–December 31, 2001

January 1, 1991–December 31, 2001

May 24, 1993–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

February 14, 1994–December 31, 2001

November 26, 1992–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

January 1, 1991–December 31, 2001

November 25, 1993–December 31, 2001

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Dhankar, R.S. (2019). Variance Ratio Test, ARIMA Model and Stock Price Behaviour. In: Risk-Return Relationship and Portfolio Management. India Studies in Business and Economics. Springer, New Delhi. https://doi.org/10.1007/978-81-322-3950-5_6

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