This paper compares how fast the information and news flows are incorporated into the stock index and prices of its constituent stocks. We follow the empirical framework provided by Kayal and Maheswaran (J Emerg Mark Finance 30, S112-S135, 2018a) using the extreme value volatility estimators over rolling window multiple days’ horizon to compare the speed of price adjustment to the market information flows. This study uses the daily price data of Nifty index and the individual stock prices of the fifty constituent stocks of this index. We observe a paradox in the speed of price adjustment as the stock index exhibit continuous random walk while many of the constituent stocks exhibit excess volatility in the same time frame. We run our analysis for two different time periods. Both the time periods exhibit a similar finding.
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Kayal, P., Mondal, S. Speed of Price Adjustment in Indian Stock Market: A Paradox. Asia-Pac Financ Markets 27, 453–476 (2020). https://doi.org/10.1007/s10690-020-09303-7
- Extreme value volatility estimators
- Speed of price adjustment
- Random walk
- Excess volatility