Abstract
This study examines the random walk behavior of Indian bond market. Bond indices published by Clearing Corporation of Indian (CCIL) were used in this study. The hypothesis is tested with multiple variance ratio tests from daily and weekly data, from 3-Jan.-2011 to 30-Dec.-2016. This paper also applies the bootstrap procedure on all the tests used because it shows desirable small sample properties under conditional heteroscedasticity. Variance test ratios show that Indian bond market does not follow random walk behavior.
Highlights
In the recent seven years, Indian bond market has seen tremendous growth
The hypothesis is tested with multiple variance ratio tests from daily and weekly data, from 3-Jan.-2011 to 30-Dec.-2016
Mixed evidences are found out on the whole and the results revealed that the PSE follows random walk behavior since 2000 with a decrease in the serial dependence of returns
Summary
In the recent seven years, Indian bond market has seen tremendous growth. The idea of asset prices following random walk comes from Efficient Market Hypothesis (EMH). This condition leads to a random walk behavior, random sequence of price changes, where the market is efficient. If the Indian bond market follows random walk behavior, the market is weak form of efficient and not predictable. This means it is impossible for a trader to generate excess return overtime by speculation. If the Indian bond market is predictable, the market is not weak-form efficient, which means that traders can make excess profit by speculative positions. There have been many researches which test for the efficient market hypothesis of stock price
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
