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Dependences in Stock Markets of South Asia

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Capital Markets and Investment Decision Making

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Abstract

Usually, large changes in equity price indices merit specific attention. If they are negative, they are particularly important as they have a potentially more severe impact on balance sheets than changes of normal size.

The stock market is filled with individuals who know the price of everything, but the value of nothing.

Phillip Fihser

Raj S. Dhankar and Madhumita Chakraborty, Dependences in Stock Markets of South Asia : India, Sri Lanka and Pakistan, Prajnan, Vol. XXXIV, No. 3, 2005–06.

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Notes

  1. 1.

    For example, see Fama (1970) for a comprehensive review.

  2. 2.

    The Milanka Price Index (MPI) was introduced in January 1999 replacing the Sensitive Price Index (SPI). Hence, in this study, we consider the Sensitive Price Index from January 1991 to December 1998 and Milanka Price Index from January 1999 to December, 2001. However, in the text, we shall refer to the whole series as Milanka Price Index.

  3. 3.

    See for example, Huizinga (1987), Fama and French (1988) and Cochrane (1988).

  4. 4.

    One variation of serial dependence is called mean reversion. With mean reversion, returns revert to an average value or asset prices revert to an equilibrium value. If an asset is priced above its equilibrium value, its price will not change randomly, it will be more inclined to decrease than to increase. Conversely, if an asset is priced below its equilibrium value, it will be more likely to increase than to depreciate further.

  5. 5.

    Another variation of serial dependence is known as trending. In a trending pattern, a positive return is more likely to be followed by another positive return than a reversal, and a negative return is likely to be succeeded by another negative return than a positive return.

  6. 6.

    The detailed results are not reported here, but are available from the authors on request.

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Authors and Affiliations

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

    Raj S. Dhankar

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Dhankar, R.S. (2019). Dependences in Stock Markets of South Asia. In: Capital Markets and Investment Decision Making. Springer, New Delhi. https://doi.org/10.1007/978-81-322-3748-8_10

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