Profitability of Volume-based Momentum and Contrarian Strategies in the Indian Stock Market

2017 ◽  
Vol 18 (4) ◽  
pp. 974-992 ◽  
Author(s):  
Supriya Maheshwari ◽  
Raj S. Dhankar
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Investment Strategies ◽  
Momentum Strategy ◽  
Contrarian Strategy ◽  
Life Cycle Theory ◽  
Contrarian Strategies ◽  
Long Run ◽  
Indian Stock Market ◽  
Relationship Of

This article investigates the relationship of trading volume with the profitability of momentum and long-run contrarian strategies for the Indian stock market. The result of the study provides support to Lee and Swaminathan (2000, The Journal of Finance, 55(5), 2017–2069) argument that trading volume predicts both the magnitude as well as the persistence of momentum in the long run. The portfolio of heavily traded securities earned higher momentum and contrarian returns as compared to low-trading securities portfolio in the Indian stock market. Hence, returns from both momentum and contrarian portfolios are positively related to the level of trading activity in the security. Further, the results provide evidence in favour of volume-based investment strategies. Both volume-based momentum strategy and volume-based contrarian strategy generate higher return in the Indian stock market as compared to pure momentum and contrarian strategy. In addition, the study provides support to momentum life cycle theory in explaining the relation between trading volume and momentum returns in the Indian stock market. These findings cast strong implication for Indian investors who are continuously engaged in identifying profitable investment strategies that can generate higher returns.

scholarly journals Mutual fund herding behavior and investment strategies in Chinese stock market

2018 ◽  
Vol 15 (2) ◽  
pp. 87-95 ◽  
Author(s):  
John Wei-Shan Hu ◽  
Yen-Hsien Lee ◽  
Ying-Chuang Chen
Keyword(s):  
Stock Market ◽  
Mutual Fund ◽  
Investment Strategies ◽  
Chinese Stock Market ◽  
Contrarian Strategy ◽  
Contrarian Strategies ◽  
Low Degree ◽  
High Degree ◽  
The Impact ◽  
The Relationship

This investigation studies the impact of mutual fund herding on the returns achieved by contrarian strategy from 1990 to 2015 in the Chinese stock market. The relationship between the profit gained by the contrarian strategy and the macroeconomic environment is also examined. First, the returns of the contrarian strategy in China’s stock market are found to be significant. Second, most loser stocks with a high degree of mutual fund herding outperform loser stocks with a low degree of mutual fund herding, revealing that the profitability of an investment portfolio depends on the degree of mutual fund herding. Third, investors should buy loser stocks with a high degree of herding and sell winner stocks with a low degree of herding during a two-year formation period, over which zero-cost contrarian strategies yield the significantly highest return. Finally, the payoff of contrarian strategies is positively related to the herding effect and negatively related to macroeconomic variables.

Market State and Investment Strategies: Evidence from the Indian Stock Market

2018 ◽  
Vol 7 (2) ◽  
pp. 154-170
Author(s):  
Supriya Maheshwari ◽  
Raj S. Dhankar
Keyword(s):  
Stock Market ◽  
Strong Relationship ◽  
Investment Strategies ◽  
Momentum Profits ◽  
Contrarian Strategies ◽  
The Us ◽  
Market State ◽  
Excess Momentum ◽  
Indian Stock Market

This study contributes to the growing literature on momentum and overreaction effect by investigating the same within the framework of the Indian stock market. Based on the most adopted methodology that employs monthly data, the empirical results derived confirm the existence of momentum and long-term overreaction effect in the Indian stock market. The overall results from the study are consistent with DeBondt and Thaler (1985) and Jegadeesh and Titman (1993) findings for the US stock market. In addition, we tested the profitability of momentum and contrarian strategies under different market states. The results indicated a strong relationship between the state of the market and momentum profitability, wherein strong momentum profits were observed following an ‘up’ market. On the contrary, long-term contrarian strategies were found to be stronger following a ‘down’ market in the Indian stock market. The market-dependent asset pricing model failed to explain excess momentum profits in the Indian stock market. The evidence from the study provides partial support to various behavioural models to explain these effects in the Indian stock market. However, there exists a need to develop a single behavioural model that could explain these anomalies completely in the emerging markets like India.

scholarly journals Relations and Emotions beyond the Boundaries in the Post Crisis Era – An Analysis of the Impact of Selected Variables on the Indian Stock Market

2018 ◽  
Vol 4 (8) ◽  
pp. 72
Author(s):  
Pooja Yadav ◽  
Nitin Huria
Keyword(s):  
Stock Market ◽  
Global Economy ◽  
Stock Index ◽  
Asia Pacific ◽  
Macroeconomic Variables ◽  
Long Run ◽  
Short Run ◽  
Current Scenario ◽  
Indian Stock Market ◽  
The Impact

From a decade or so Indian continent has become the centre of attraction in the global economies. This changed outlook is due to the fact that India embraces vast availability of resources and opportunities which makes it the most vibrant global economy in the current scenario of worldwide sluggishness. On this path of growth and prosperity India is showing stiff commitments and competitive edges with developed as well as emerging countries. To be more specific, during this voyage in the Asia pacific region recently on one side India has seen stronger bonding with some of its old mates like Japan but on the other part it has faced strain like situation from its stronger competitor contender china on the same time. Hence, in this context the main aim of this paper is to examine the long run and short run equilibrium impacts of Japan and Chinese stock index as well as macroeconomic variables impact on Indian stock market. This paper finds the presence of both long and short run equilibrium impacts from China and Japan to India. In case of Japanese financial market (Nikki 225) has a trivial negative but significant long run impact whereas, the Chinese stock index (SSE composite) is operating at the short run with the same mild negative but significant impact on the Indian stock market. The results of the impact of macroeconomic variables find the existence of long run as well as short run equilibrium from some of the selected variables on Indian stock market.

scholarly journals A Study of Black–Scholes Model’s Applicability in Indian Capital Markets

Paradigm ◽  
2020 ◽  
Vol 24 (1) ◽  
pp. 73-92
Author(s):  
Anubha Srivastava ◽  
Manjula Shastri
Keyword(s):  
Stock Market ◽  
Option Pricing ◽  
Trading Volume ◽  
Stock Exchange ◽  
Market Price ◽  
Significant Degree ◽  
Pricing Model ◽  
Fair Price ◽  
Black Scholes ◽  
Indian Stock Market

Derivative trading, started in mid-2000, has become an integral and significant part of Indian stock market. The tremendous increase in trading volume in Indian stock market has reflected into high volatility in the option prices. The pricing of options is very complex aspect of applied finance and has been subject of extensive research. Black–Scholes option model is a scientific pricing model which is applied for determining the fair price for option contracts. This article examines if Black–Scholes option pricing model (BSOPM) is a good indicator of option pricing in Indian context. The literature review highlights that various studies have been conducted on BSOPM in various stock exchange across the world with mixed outcome on its relevance and applicability. This article is an empirical study to test the relevance of BSOPM for which 10 most popular industry’s stock listed on National Stock Exchange have been taken. Then the BSOPM has been applied using volatility and risk-free rate. Furthermore, t-test has been used to test the hypothesis and determine the significant relationship between BS model values and actual model values. This study concludes that BSOPM involves significant degree of mispricing. Hence, this model alone cannot be adopted as an indicator for option pricing. The variation from market price is synchronised with respect to moneyness and time to maturity of the option.

scholarly journals Initial bank loans, zero-leverage firms and stock market liquidity

2019 ◽  
Vol 46 (5) ◽  
pp. 1028-1051 ◽  
Author(s):  
Sijia Zhang ◽  
Andros Gregoriou
Keyword(s):  
Stock Market ◽  
Stock Price ◽  
Trading Volume ◽  
Market Liquidity ◽  
Bank Loans ◽  
Bank Loan ◽  
Market Reactions ◽  
Content Type ◽  
Bid Ask Spread ◽  
Long Run

Purpose The purpose of this paper is to examine stock market reactions and liquidity effects following the first bank loan announcement of zero-leverage firms. Design/methodology/approach The authors use an event studies methodology in both a univariate and multivariate framework. The authors also use regression analysis. Findings Using a sample of 96 zero-leverage firms listed on the FTSE 350 index over the time period of 2000–2015, the authors find evidence of a significant and permanent stock price increase as a result of the initial debt announcement. The loan announcement results in a sustained increase in trading volume and liquidity. This improvement continues to persist once the authors control for stock price and trading volume effects in both the short and long run. Furthermore, the authors examine the spread decomposition around the same period, and discover the adverse selection of the bid–ask spread is significantly related to the initial bank loan announcement. Research limitations/implications The results can be attributed to the information cost/liquidity hypothesis, suggesting that investors demand a lower premium for trading stocks with more available information. Originality/value This is the first paper to look at multiple industries, more than one loan and information asymmetry effects.

scholarly journals Repercussions of COVID-19 on the Indian stock market

2021 ◽  
Vol 5 (S1) ◽  
pp. 1495-1509
Author(s):  
Dhananjay Ashri ◽  
Bibhu Prasad Sahoo ◽  
Ankita Gulati ◽  
Irfan UL Haq
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Banking Sector ◽  
Oil And Gas ◽  
Negative Impact ◽  
Long Run ◽  
Short Run ◽  
Indian Stock Market ◽  
The Impact ◽  
Daily Returns

The present paper determines the repercussions of the coronavirus on the Indian financial markets by taking the eight sectoral indices into account. By taking the sectoral indices into account, the study deduces the impact of virus outbreak on the various sectoral indices of the Indian stock market. Employing Welch's t-test and Non-parametric Mann-Whitney U test, we empirically analysed the daily returns of eight sectoral indices: Nifty Auto, Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty Oil and Gas, Nifty Pharma, and Nifty Bank. The results unveiled that pandemic had a negative impact on the automobile, FMCG, pharmaceuticals, and oil and gas sectors in the short run. In the long run, automobile, oil and gas, metals, and the banking sector have suffered enormously. The results further unveiled that no selected indices underperformed the domestic average, except NIFTY Auto. 

Cointegration of Asian Stock Markets: Empirical Evidence from India

2016 ◽  
Vol 6 (2) ◽  
Author(s):  
Beeralaguddada Srinivasa Veerappa
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Causality Test ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Short Run ◽  
Auto Regressive ◽  
Global Stock Markets ◽  
Indian Stock Market

At present stock return is significantly related to other global stock markets. The present paper empirically investigates the short run and long run equilibrium relationship between the stock market of India, Japan Hong Kong, Singapore, Malaysia, China, and Australia monthly data during January 1995 to December 2013. Researcher employs correlation test, multivariate co-integration framework, Vector Auto Regressive error-correction model and Granger causality test with reference to financial up evils in Asia and world viz., Asian crisis (1997/98), financial crisis (2008) Inflation conditions, Natural disasters, financial up evils etc. of long run relationship. Results find that the Indian stock market return is significantly co-integrated with long run and short run situations/causalities in Asian Stock returns.

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