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How Random is the Walk: Efficiency of Indian Stock and Futures Markets

  • Udayan Kumar Basu
Part of the New Economic Windows book series (NEW)

Abstract

Time series of prices of stock and its rates of return has been one of the major areas of study in Econophysics. The price of a stock depends on a number of factors as well as information related thereto, and how quickly and effectively the price of a stock assimilates all such information decides the efficiency of the stock market. Instead of individual stocks, people often study the behaviour of stock indices to get a feel of the market as a whole, and the outcomes of such studies for the Dow Jones Industrial Average (DJIA), the Nasdaq Index and the S & P 500 Index have been listed in a number of articles. In this context, it has also been argued that for a market to be considered sufficiently liquid, correlation between successive price movements and rates of return should be insignificant, because any significant correlation would lead to an arbitrage opportunity that is expected to be rapidly exploited and thus washed out. The residual correlations are those little enough not to be profitable for strategies due to imperfect market conditions. Unless transaction costs or slippages or any other impediment exists, leading to some transactional inefficiency, arbitrages would take place to bring back the markets to a stage of insignifficant correlations [1, 2].

Keywords

Stock Market Stock Price Stock Prex Future Market Stock Index 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

  1. 1.
    Sornette D (2002) Why Stock Markets Crash? Princeton University PressGoogle Scholar
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    Wang Y, Wu J, Di Z (2004) Physics of EconophysicsGoogle Scholar
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    Mandelbrot BB, Hudson RL (2005) The (Mis) Behaviour of Markets. Viva Books Pvt. Ltd.Google Scholar
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    Agarwal RN. Financial Integration and Capital Markets in Developing Countries A Study of Growth, Volatility and Efficiency in the Indian Capital MarketGoogle Scholar
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    Pandey A. Efficiency of Indian Stock MarketGoogle Scholar
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    Cooray A. Do the Stock Markets of South Asia follow a Random Walk? School of Economics, University of Tasmania, Australia.Google Scholar

Copyright information

© Springer-Verlag Italia 2006

Authors and Affiliations

  • Udayan Kumar Basu
    • 1
  1. 1.Future Business SchoolKolkataIndia

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