Market efficiency and international diversification: Evidence from India |
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| Authors: | Mehmet F Dicle Aydin Beyhan Lee J Yao |
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| Institution: | 1. J A Butt College of Business, Loyola University New Orleans, United States;2. Faculty of Trade, T.C. Yeditepe University, Turkey;1. Department of Computer and Communication Engineering, National Kaohsiung First University of Science and Technology, Kaohsiung, Taiwan;2. Department of Computer Science and Information Engineering, Chang Jung Christian University, Tainan, Taiwan |
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| Abstract: | This study evaluates one of the most important emerging markets, India (Bombay Stock Exchange and Indian National Exchange), for its efficiency and for its potential to offer diversification benefits to international investors. Market-wide tests include; 1) contemporaneous relationship, 2) Granger type causality and 3) day-of-the-week effect. Tests on individual Indian stocks include: 1) panel estimation of Granger causality, 2) stock-by-stock estimation of Granger causality and 3) runs test. In sum, Indian markets are well integrated with the international equity markets, a characteristic that lowers the international diversification benefits. While day-of-the-week effect is an international spillover, it may be possible to predict individual Indian stocks' returns through causality with international equity markets and through momentum trading techniques. |
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