Risk-Managed Momentum: An Evidence from Indian Stock Market

2021 ◽  
pp. 231971452110230
Author(s):  
Simarjeet Singh ◽  
Nidhi Walia ◽  
Pradiptarathi Panda ◽  
Sanjay Gupta
Keyword(s):  
Stock Market ◽  
Asset Management ◽  
Stock Exchange ◽  
Sharpe Ratio ◽  
Relative Momentum ◽  
Extended Time ◽  
Momentum Strategies ◽  
Momentum Profits ◽  
Indian Stock Market ◽  
Time Frames

Relative momentum strategies yield large and substantial profits in the Indian Stock Market. Nevertheless, relative momentum profits are negatively skewed and prone to occasional severe losses. By taking into consideration 450 stocks listed on the Bombay Stock Exchange, the present study predicts the timing of these huge momentum losses and proposes a simple risk-managed momentum approach to avoid these losses. The proposed risk-managed momentum approach not only doubles the adjusted Sharpe ratio but also results in significant improvements in downside risks. In contrast to relative momentum payoffs, risk-managed momentum payoffs remain substantial even in extended time frames. The study’s findings are particularly relevant for asset management companies, fund houses and financial academicians working in the area of asset anomalies.

Seasonality in Momentum Profits: Evidence from the Indian Stock Market

2015 ◽  
Vol 4 (3and4) ◽  
Author(s):  
Supriya Maheshwari ◽  
Raj S. Dhankar
Keyword(s):  
Stock Market ◽  
Stock Price ◽  
Stock Exchange ◽  
Practical Implementation ◽  
Momentum Strategies ◽  
Momentum Profits ◽  
Significant Difference ◽  
The Us ◽  
Show Evidence ◽  
Indian Stock Market

The paper investigates Indian momentum profitability along with its performance stability round the year using the stock price data from National Stock Exchange (NSE). Results show evidence in favour of momentum profitability over the sample period from 1997 to 2013. Moreover, the momentum performance is not specific to any particular month suggesting no influence of calendar on momentum anomaly in the Indian stock market, though momentum strategies performed differently in different calendar months, with particularly strong negative returns in the month of May. However, no statistically significant difference was observed among the mean monthly momentum returns across calendar months. Contrary to the US market findings, no January or similar April seasonality is observed in the Indian momentum profits suggesting some unique characteristics of Indian momentum profitability. In nutshell, the results from the study suggest support in favour of practical implementation of momentum strategies throughout the year in the Indian stock market.

Momentum anomaly: evidence from the Indian stock market

2017 ◽  
Vol 14 (1) ◽  
pp. 3-22 ◽  
Author(s):  
Supriya Maheshwari ◽  
Raj Singh Dhankar
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Investment Strategy ◽  
Momentum Effect ◽  
Momentum Strategies ◽  
Content Type ◽  
Momentum Profits ◽  
The Usa ◽  
Short Run ◽  
Indian Stock Market

Purpose The purpose of this paper is to provide insights into the profitability of momentum strategies in the Indian stock market. This study further evaluates whether the momentum effect is a manifestation of size, value or an illiquidity effect. Design/methodology/approach Monthly stock return data of 470 BSE listed stocks over the sample period from January 1997 to March 2013 were used to create extreme portfolios (winner and loser). The returns of extreme portfolios were evaluated using t-statistics and a risk-adjusted measure. Further checks were imposed by controlling for other potential sources of risk including size, value and illiquidity. Findings The study provides support in favor of momentum profitability in the Indian stock market. In contrast to the literature, momentum profitability is driven by winning stocks, and hence, buying past winning stocks generates higher returns than shorting loosing stocks in the Indian stock market. Strong momentum profits were observed even after controlling for size, value and trading volume of stocks. This suggests that the momentum effect in the Indian stock market is not a manifestation of small size effect, value effect or an illiquidity effect. Practical implications From the practitioner’s perspective, the study indicates that a momentum-based investment strategy in the short run is still persistent and can generate potential profits in the Indian stock market. Originality/value There is little empirical evidence on the momentum profitability, especially in the Indian stock market. The study contributes toward the literature by analyzing the momentum profitability even after controlling for size, value and an illiquidity effect. Some aspects of the momentum effect were observed to be dissimilar from those observed in literature for the USA and other countries. Such findings justify the need for testing the momentum profitability in stock markets other than the USA.

scholarly journals PROFITABILITY OF CAPM MOMENTUM STRATEGIES IN THE US STOCK MARKET

2017 ◽  
Vol 18 (2) ◽  
Author(s):  
Terence Tai-Leung Chong ◽  
Qing He ◽  
Hugo Tak-Sang Ip ◽  
Jonathan T. Siu
Keyword(s):  
Stock Market ◽  
Historical Review ◽  
Sharpe Ratio ◽  
Momentum Strategies ◽  
Momentum Profits ◽  
Market Crashes ◽  
The Us ◽  
Sharpe Ratios ◽  
Capm Model ◽  
French Model

This paper provides a historical review of the performance of the risk-adjusted momentum strategies when buying and selling stocks according to the alpha estimates of the CAPM and Fama–French regressions. Our sample covers over 60 million US daily firm-return observations. High Sharpe ratios are obtained under our risk-adjusted strategies. It is also found that stock market crashes have no apparent impact on our momentum profits. Keywords: Momentum Strategies; Sharpe Ratio; Fama-French Model; CAPM Model.

The Effect of Global Crises on Momentum Profitability: Evidence from the Indian Stock Market

2017 ◽  
Vol 21 (1) ◽  
pp. 1-12 ◽  
Author(s):  
Supriya Maheshwari ◽  
Raj S. Dhankar
Keyword(s):  
Stock Market ◽  
Financial Crises ◽  
Convincing Evidence ◽  
Momentum Strategy ◽  
Momentum Strategies ◽  
Crisis Period ◽  
Holding Period ◽  
Momentum Profits ◽  
International Stock Markets ◽  
Indian Stock Market

There is a plethora of research that suggests profitability of momentum strategies in international stock markets. The current study adds to the existing literature by exploring the same in the Indian stock market over the more recent years. In addition, the study aims to test whether the momentum strategy performs persistently and remains consistent even during financial crises periods, emphasizing on the recent global meltdown of 2008. Eight momentum strategies were investigated with different combinations of formation and holding period and the study adds convincing evidence in favour of Indian momentum profitability. Statistically as well as economically significant momentum returns were observed that remained statistically significant even after risk adjustment. However, the financial crisis induced significant changes in the Indian momentum profitability. The momentum returns were observed to be positively high during pre-crisis period that turn negative during crisis period and again reverse to generate high momentum returns during the post-crisis period. The evidence indicates non-stability of momentum profits wherein momentum strategies crash during the financial crises periods.

Application of CAPM in the Indian Stock Market A Comprehensive Reassessment

2005 ◽  
Vol 1 (2) ◽  
pp. 1-12 ◽  
Author(s):  
Raj S. Dhankar ◽  
Rohini Singh
Keyword(s):  
Stock Market ◽  
Capital Market ◽  
Stock Exchange ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model ◽  
Conflicting Evidence ◽  
Empirical Tests ◽  
Indian Stock Market

There is conflicting evidence on the applicability of Capital Asset Pricing Model in the Indian stock market. Data for 158 stocks listed on the Bombay Stock Exchange was analyzed using a number of tests from 1991–2002, the period which roughly coincides with the period after liberalization and initiation of capital market reforms. Taken in aggregate the various empirical tests show that CAPM is not valid for the Indian stock market for the period studied.

Do Indian stock market sentiments impact contemporaneous returns?

2018 ◽  
Vol 7 (3) ◽  
pp. 332-346
Author(s):  
Divya Aggarwal ◽  
Pitabas Mohanty
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Temporal Dynamics ◽  
Stock Exchange ◽  
Principal Component ◽  
Stock Index ◽  
Content Type ◽  
Investor Sentiments ◽  
Indian Stock Market ◽  
The Impact

Purpose The purpose of this paper is to analyse the impact of Indian investor sentiments on contemporaneous stock returns of Bombay Stock Exchange, National Stock Exchange and various sectoral indices in India by developing a sentiment index. Design/methodology/approach The study uses principal component analysis to develop a sentiment index as a proxy for Indian stock market sentiments over a time frame from April 1996 to January 2017. It uses an exploratory approach to identify relevant proxies in building a sentiment index using indirect market measures and macro variables of Indian and US markets. Findings The study finds that there is a significant positive correlation between the sentiment index and stock index returns. Sectors which are more dependent on institutional fund flows show a significant impact of the change in sentiments on their respective sectoral indices. Research limitations/implications The study has used data at a monthly frequency. Analysing higher frequency data can explain short-term temporal dynamics between sentiments and returns better. Further studies can be done to explore whether sentiments can be used to predict stock returns. Practical implications The results imply that one can develop profitable trading strategies by investing in sectors like metals and capital goods, which are more susceptible to generate positive returns when the sentiment index is high. Originality/value The study supplements the existing literature on the impact of investor sentiments on contemporaneous stock returns in the context of a developing market. It identifies relevant proxies of investor sentiments for the Indian stock market.

scholarly journals Random Walk Investigation in Indian Market with special reference to S&P Nifty – Fifty Stocks

2015 ◽  
Vol 4 (4) ◽  
pp. 52-61
Author(s):  
Tamilselvan Manickam ◽  
R Madhumitha
Keyword(s):  
Stock Market ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Empirical Support ◽  
Weak Form ◽  
Indian Market ◽  
Price Series ◽  
Stock Market Efficiency ◽  
Indian Stock Market ◽  
Weak Form Efficiency

The competence of a financial system is entirely depending upon the stock market efficiency. The gradual growth of equity investor’s participation is inevitable to enrich the overall growth of emerging economies.Hence the necessity is felt to provide an empirical support to the investing community. For the purpose, this study attempts to examine the weak-form efficiency of Indian stock market – National Stock Exchange (NSE). The study has used the daily closing price of the Nifty fifty stocks from 3rdJanuary 2011 to 24thApril 2015. To test the weak form efficiency both parametric and non-parametric tests called Autocorrelation, Augmented Dicky Fuller test, and Runs Test were performed.  The study reveals that 39 stocks of NSE-Nifty Fifty are found to be weak form inefficient, so that the investors can formulate trading strategies to gain abnormal returns. The Index and 10 stocks are found to be weak form efficient during the study period since the price series found to be autocorrelation existence.

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 A comprehensive investigation into style momentum strategies in China

2020 ◽  
Author(s):  
Chen Su
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Short Sales ◽  
Comprehensive Investigation ◽  
Momentum Strategies ◽  
Style Investing ◽  
Price Momentum ◽  
Institutional Settings ◽  
Momentum Profits ◽  
China Stock Market

AbstractThis study conducts a comprehensive investigation into style momentum strategies—the combination of price momentum strategies based on previous medium-term returns and style investing in terms of firm characteristics—in the China stock market over the period 1994 to 2017. Although we do not find style momentum profits over the first sub-period 1994 to 2006, strong evidence shows that style momentum strategies are profitable over the second sub-period 2007 to 2017, even after controlling for trading costs and various market and firm-specific risks. Importantly, the observed style momentum in the second sub-period is distinguished from price momentum and industry momentum but could be attributed to the improved institutional settings in recent years. Specifically, the fast growth of institutional investors since 2006, along with the introduction of margin trading and short sales in 2010, provides style switchers with more efficient investment vehicles to trade an entire style in the China stock market. Finally, we find that style profits exhibit momentum in a cyclical nature; in particular, style momentum profits are negatively related to market states, implying that it is likely for institutional investors to make profits by constructing style momentum strategies when stock market experiences a major decline.

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