Market Efficiency and Integration: An Examination of Indian Stock Market
DOI:
https://doi.org/10.32890/ijbf2003.1.2.2Abstract
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ANNEXURE 1: LIST OF TABLES TABLE No. TABLE TITLE Correlogram of the Indian Stock Price Index H. wl y IO 2 Correlogram of the First difference of Indian Stock Price Index Correlogram of the EMF index series Correlogram of the First Difference of the EMF index Augmented Dickey-Fuller Test for stock price index of India at lag | 3.6 Augmented Dickey-Fuller Test for First difference stock price index of India at lag 1 Augmented Dickey-Fuller Test for First difference stock price index of India at lag 13 Pair-wise Granger Causality Tests between the First Dif-ference series of stock price of India and the EMF Index Simple Linear Regression of EMF Index on Stock Price Index of India DF Unit Root Test on the residuals of regression of EMF Index on the stock price index of India (constant) DF Unit Root Test on the residuals of regression of EMF Index on the stock price index of India (constant and trend) Simple Linear Regression between the first Difference series of EMF Index and the Stock Price Index of India Cochrane-Orcutt estimation on the First Difference se-ries of EMF Index and the Stock Price of India (singu-lar value decomposition using Prais-Winsten Cochrane-Orcutt estimation between the EMF Index and the Stock Price of India (singular value decomposition using Prais-Winsten) Marker Efficiency And Integration: An Examination Of Indian Stock Market Table 3.1 Correlogram of the Indian Stock Price Index Sample: 1999;02 2003:05 Included observations: 52 Autocorrelation Partial k AC PAC Correlation d ese | a Pera 0.895 | 0.895 | 44.104 0.000 Na Aly | 0.773 | -0.141 | 77.654 0.000 an 6le 3 0.668 | 0.023 | 103.19 0.000 a A 0.588 | 0.057 | 123.44 0.000. pee | aR; 0.542 | 0.104] 141.01 0.000. «(Ree || A. 0.481 | -0.124] 155.12 | 0.000 0.362 | -0.297] 163.31 | 0.000 0.257 | 0.056 | 167.53 | 0.000 0,194 | 0,126 | 169.98 0.000. 0.130 | -0.165 | 171.10 0.000, 0.092 | 0,040 | 171.68 0.000. 0.019 | -0.171 | 171.70 0.000, -0.056 | 0.070 | 171.93 0.000. -0.095 | 0.062 | 172.60 0.000 -0.111 | -0.044] 173.54 | 0.000 -0.146 | -0,151] 175.20 | 0.000 -0.173 | 0.037 | 177.59 | 0.000 -0.206 | 0.039 | 181.11 0.000 -0.255 | -0.168 | 186.63 0.000 -0.271 | -0.047 | 193.08 0.000 -0.274 | 0.093 | 199.88 0.000 -0.272 | 0.043 | 206.80 0.000 -0.263 | -0.037 | 213.52 0.000 -0.259 | -0.060| 220,23 } 0,000 Table 3.2 Correlogram of the first difference of Indian Stock Price Index Q-Stat| Probability 0.5668] 0,452 0.5914 2.5743 3.3774 3.7112 9.5759 9.6855 12.552 12.684 13.29] 17.115 17.599 18.337 20.659 20.664 21.412 21.838 21.838 24.703 25.049 25.292 25.293 25.446 26.290 Sample: 1999:02 2003:05 Included observations: 51] Autocorrelation Partial k AC | PAC Correlation a 0.102 | 0.102 -0.021 | -0. -0.188 | -0.184 -0.118 | -0.085 0.075 | 0.093 0.312 | 0.278 -0.042 | -0.144 -0.214 | -0.223 -0.045 | 0.129 -0.096 | -0.050 0.238 | 0.150 0.084 | -0.085 -0.102 | -0,088 -0.178 | -0.004 -0.008 | 0. -0.098 | -0.151 0.073 | -0.091 -0.001 | 0,002 -0.184 | -0.073 -0.063 | -0.052 -0.052 | -0.092 0.003 | -0. 0.040 | 0.008 0.092 | 0.078 Table 3.3 Correlogram of the EMF index series Sample: 1999:02 2003:05 Included observations: 52 Autocorrelation Partial Probability Correlation ak ea 0,919 | 0,919 146.465 | 0.000 _ pata | we | 0,806 | -0.241|82.980} 0.000 em | ut 3 | 0.706 | 0.052} 111.51] 0.000 ea ala 0,616 | -0.020] 133.71 0.000 Hi... | ale 0.539 | 0.014 | 151.05 0.000, eet | Ale 0.477 | 0.031 | 164.92 0.000. fee | | 0.396 | -0.194] 174.69 0.000 fe | AL, 0.301 | -0.080] 180.48} 0.000 | sj 0.214 | -0,003] 183.47} 0.000 0.139 | -0.019] 184.77] 0.000 0,072 } -0,039] 185.13 ),000 0,023 | 0.031 | 185.16 0.000 -0.028 | -0,097 | 185.22 ),000 -0.058 | 0.151 | 185.47 0.000 -0.095 | -0.163 | 186.16 0.000 -0.125 | 0.056 | 187.37 0,000 -0.152 | -0,064 | 189.23 0.000 -0.177 | -0.040] 191.83] 0.000 -0,200 | -0.003] 195,24] 0.000 -0.212 | -0.014] 199.19 0.000 -0,198 | 0.150 | 202.73 0.000 -0.185 | -O.111 | 205.94 0.000 -0.190 | -0.083 | 209.45 0.000 -0.188 | 0.071 | 213.00 0.000 Table 3.4 Correlogram of the first difference of the EMF index series Sample: 1999:02 2003:05 Included observations: 51] Autocorrelation Partial AC Probability Correlation 0,194 0.007 0. -0.096 -0.011 0.079 0.079 -0. -0.085 0.063 0. 0. -0.147 0. -0.160 -0.076 -0. -0.117 -0,110 -0.184 -0. 0111 -0. 0.115 0.194 -0. 0. -0.107 0. 0.075 0.056 -0.062 -0.075 0.113 0,006 0. -0.210 0.120 -0,192 0. -0,126 -0,068 -0,086 -0.167 0.055 0.067 -0. 0.075 0.153 0,359 0.560 0.628 0.761 0.811 0.850 0.907 0.920 0.942 0.965 0.979 0.954 0.972 0.935 0.944 0.961 0.951 0.943 0.863 0.893 0,880 0,907 0.889 Table 3.5 Augmented Dickey-Fuller Test for stock price index of India at lag 1 ADF Test Statistic -2.911624 1% Critical Value* -4,1498 5% Critical Value -3.5005 10% Critical Value -3.1793 *MacKinnon’s critical values for rejection of hypothesis of a unit root. Augmented Dickey-Fuller Test Equation Dependent Variable: D(INDIA) Sample(adjusted): 1999;04 2003:05 Included observations: 50 after adjusting endpoints Variable Coefficient Std. Error L-Statistic INDIA(-1) -0.210953 0.072452 -2.911624 0.0055 DUNDIA(-1)) 0.156323 0.136913 1.141768 0.2595 | 31.37179 10.30530 3.044239 0.0039 @TREND(1999:02) — -0.321379 0.126663 -2.537273 0.0146 R-squared 0.180867 Mean dependent variable — -0.097620 Adjusted R-squared 0.127445 S.D. dependent variable 11.18234 S.E. of regression 10.44549 Akaike info criterion 7.606837 Sum squared residuals 5018.982 Schwarz criterion 7.759798 Log likelihood - 186.1709 F-statistic 3.385642 Durbin-Watson stat 1.999153 Probability (F-statistic) 0.025854 Table 3.6 Augmented Dickey-Fuller Test for first difference stock price index of India at lag 1 ADF Test Statistic 4.741076 1% Critical Value* 5% Critical Value 10% Critical Value *MacKinnon s critical values for rejection of hypothesis of a unit root. Augmented Dickey-Fuller Test Equation Dependent Variable: D(INDIA,2) Sample(adjusted): 1999:05 2003:05 Included observations, 49 after adjusting endpoints Variable Coefficient Std. Error t-Statistic D(INDIA(-1)) -0.942327 0.198758 — -4.741076 0.0000 DUINDIA(-1),2) 0,042046 0.146772 0.286470 0.7758 Cc 1.731484 3.520088 0.490507 0.6262 (@TREND(1999:02) -0,078603 0.116180 -0.676561 0.5021 R-squared 0.459540 Mean dependent variable — -0.376592 Adjusted R-squared 0.423509 8.D. dependent variable 14,91556 S.E. of regression 11.32494 Akaike info criterion 7.769999 Sum squared residual $771.438 Schwarz eriterion 7.924433 Log likelihood -186,3650 F-statistic 12.75413 Durbin-Watson stat 1.901157 Probability(F-statistic) 0.000004 Table 3.7 Augmented Dickey-Fuller Test for first difference stock price index of India at lag 13 DF Test Statistic ~§.129179 1% Critical Value* 4.2242 5% Critical Value -3,5348 10% Critical Value -3,1988 *MacKinnon’s critical values for rejection of hypothesis of a unit root. Augmented Dickey-Fuller Test Equation Dependent Variable: D(INDIA,2) Sample(adjusted): 2000:05 2003:05 Included observations: 37 after adjusting endpoints Variable Coefficient Std. Error t-Statistic Prob. DCINDIA(-1)) -3.143317 0.612830 -5.129179 0.0000 DUINDIA(-1),2) 1.591580 0.494149 3.220851 0.0041 D(INDIA(-2),2) 1.215525 0.438828 2.769937 0.0115 DUNDIA(-3),2) 0.916158 0.404949 2.262402 0.0344 D(INDIA(-4),2) 0.677694 0.370682 1.828237 0.0818 D(INDIA(-5),2) 0.39943] 0.345335 1.156647 0.2604 D(INDIA(-6),2) 0.382628 0.307662 1.243665 0.2273 DUNDIA(-7).2) 0.223382 0.288770 0.773563 0.4478 DUINDIA(-8),2) -0.021415 0.272548 -0.078574 0.9381 D(INDIA(-9),2) -0.155489 0.239432 -0,649410 0.5231 D(INDIA(-10),2) 0.277739 0.210750 -1.317861 0.2017 DUNDIA(-11),2) -0.131709 0.178734 -0,736897 04693 D(INDIA(-12),2) -0.046775 0.152225 -0.307277 0.7617 D(INDIA(-13),2) 0,004537 0.112119 0,040466 0.9681 oe -22.67546 5.389756 -4.207140 0.0004 @TREND(1999:02) 0.494841 0.142803 3.465192 0.0023 R-squared 0.807997 Mean dependent variable 0.432351 Adjusted R-squared 0.670851 S.D. dependent variable12.37835S.E. of regression 7.101646 Akaike info criterion 7.057000 Sum squared residual 1059.101 Schwarz criterion 7.753613 Log likelihood -114.5545 F-statistic 5.891537 Durbin-Watson stat 2.035707 Probability(F-statistic) — 0.000137 Table 4.1 Pair-Wise Granger Causality Tests between the first difference series of stock price of India and the EMF Index PALR-WISE GRANGER CAUSALITY TEST Sample: 1999-02 2003-05 Lags: 2 Null Hypothesis: Observations F-Statistic Probability EMF Index does not Granger Cause INDIAI 50 2.14296 0.12913 INDIA does not Granger Cause EMF Index 0.61262 0.54639 PAIR-WISE GRANGER CAUSALITY TEST Sample: 1999:02 2003:05 Lags: 4 Null Hypothesis: Observations F-Statistic Probability EMF Index does not Granger Cause INDIA 48 1.48046 0.22677 INDIA does not Granger Cause EMF Index 0.33611 0.85195 PAIR-WISE GRANGER CAUSALITY TEST Sample: 1999-02 2003:05 Lags: 8 Observations F-Statistic Probability EMF Index does not Granger Cause INDIA 44 2.01120 0,08361 INDIA does not Granger Cause EMF Index 1.38718 0.24652 PAIR-WISE GRANGER CAUSALITY TEST Sample: 1999:02 2003:05 Lags: 16 Null Hypothesis: Observations F-Statistic Probability EMF Index does not Granger Cause INDIA 36 7.97674 0.05628 INDIA does not Granger Cause EMF Index 0.86578 0.64256 Table 5.1 Simple linear regression of EMF index on stock price index of India Dependent Variable: INDIA Method: Least Squares Sample; 1999:02 2003:05 Included observations: 52 Variable Coefficient Std. Error t-Statistic Probability EMF 0.307736 0.004119 74,70337 0.0000 R-squared 0.829402 Mean dependent variable 107.8734 Adjusted R-squared 0.829402 S.D. dependent variable 25.79040 S.E. of regression 10.65233 Akaike info criterion 7.588478 Sum squared residual 5787.077 Schwarz criterion 7.626001 Log likelihood -196.3004 = Durbin-Watson stat 0.796214 Table 5.2 DF Unit Root Test on the residuals of regression of EMF Index on the stock price index of India (constant) Coefficient t-test Constant -.2802858 -.2301427 -3931654 -3,439124 DF statistic = -3.439124 1% critical tT value -3.58 Test Equation: u, =B, + du, 5% critical T value -2.93 Table 5.3 DF Unit Root Test on the residuals of regression of EMF Index on the stock price index of India (constant and trend) Coefficient t-test Constant -.2875105 -.2353663 -.40766 -3.515879 -7.056618E-02 ~.8418369 DF statistic = -3.515879 1% eritical t value -4. Test Equation: u, =P, +B,1+ du, 5% critical t value -3.50 | Table 6.1 Simple linear regression between the first differenced series of EMF index and the stock price index of India Dependent Variable: First Difference of Stack Price index of INDIA Method; Least Squares Sample: 1999-02 2003:05 Included observations; 52 Variable Coefficient Std. Error — t-Statistic Prob. First Difference of EMF Index 0.239455 0.054227 4.415800 0.0001 R-squared 0.276583 Mean dependent variable -0.029077 Adjusted R-squared 0.276583 S.D. dependent variable 11.00571 S.E. of regression 9.360787 Akaike info criterion 7.329979 Sum squared residuals 4468.841 Schwarz criterion 7.367503 Log likelihood -189.5795 Durbin-Watson stat 2.224178 Table 6.2 Cochrane-Orcutt Estimation On The First Difference Series Of Emf Index And The Stock Price Of India (Singular Value Decomposition Using Prais-Winsten) MAXIMUM NUMBER OF DIGITS OF CONVERGENCE OF SUM OF SQUARED RESIDUALS: 15, ACTUAL NUMBER OF DIGITS OF CONVERGENCE OF SUM OF SQUARED RESIDUALS: 14. MAXIMUM NUMBER OF ITERATIONS: 20 ACTUAL NUMBER OF ITERATIONS: 11 DEPENDENT VARIABLE IS FIRST DIFFERENCE OF INDIA NUMBER OF OBSERVATIONS — 52 DEGREES OF FREEDOM 50 R 2872051. R?ADI.2726583 UNCENTERED R° -2872102 MEAN OF DEP VAR 2,941176E-O2 FTEST 19.74348 PROB OF F TEST 5.058986E-O5 DURBIN-WATSON 2.009362 DURBIN'SH 0 VARIANCE OF ESTIMATE 89.72977 SUM OF SQUARED RESID 4396.759 SEE OR RMSE 9.47258 SUM OF ABS(RES) 350.173 RHO -7.335245E-03 LOG(LIKELIHOOD) -186,0142 SCHWARZ CRITERION -187.9801 AKAIKE CRITERION -187.0142. = STDDEVOFDEPVAR 11.10706 COEFFICIENT STD. ERROR. T-RATIO SIGNIF, FIRST DIFFERENCE EMF.2520103 5.326277E-02 4.731453 0.000019 AR-LAG-1 -. 1187808 1390367 =.8543125 0.397089 Table 6.3 Cochrane-Orcutt Estimation Between The Emf Index And The Stock Price Of India (Sin 1 iti ing Prais-Winsten MAXIMUM NUMBER OF DIGITS OF CONVERGENCE OF SUM OF SQUARED RESIDUALS.15, ACTUAL NUMBER OF DIGITS QF CONVERGENCE OF SUM OF SQUARED RESIDUALS: 13. MAXIMUM NUMBER OF ITERATIONS: 20 ACTUAL NUMBER OF ITERATIONS: & DEPENDENT VARIABLE IS STOCK PRICE INDEX OF INDIA NUMBER OF OBSERVATIONS 520 DEGREES OF FREEDOM 50 R? -8908372 RR? ADJ 8886539 UNCENTERED R? 9941931 MEAN OF DEP VAR 107.8443 F TEST 408.0315 PROB OF FTEST 1.062268E-DURBIN-WATSON 1,923278 DURBIN'SH 0 VARIANCE OF ESTIMATE 74.18438 SUM OF SQUARED RESID 3709.219 SEE OR RMSE 8.613035 SUM OF ABS(RES) 303.6494 RHO 3.618E-02 LOG (LIKELIHOOD) -184.7354 SCHWARZ CRITERION -186.7111 AKAIKE CRITERION -185.7354 STD DEV OF DEP VAR 25.81183 COEFFICIENT STD. ERROR. T-RATIO SIGNIF, EMFINDEX.305345 8.296425E-03 36.8044 0.000000 AR-LAG-1 6107702 109804 5.562368 0.000001 ANNEXURE 11: LIST OF EXHIBITS EXHIBIr TITLE E-views output Descriptive Statistics for the stock price index of India E-views output Deseriptive Statistics for the First Differences of stock price index of India E-views output Descriptive Statistics for the EMF Index E-views output Descriptive Statistics for First Differences of EMF Index Time Plot for the Stock Price Index of the EMF index Time Plot for the Stock Price Index of India Actual and Forecast values of Stock Price of India compared Actual and Forecast values of Stock Price of India compared (Forecast based on first difference series) Exhibit 2.1 E-views output descriptive statistics for the stock price index of India Series : INDIA Sample 1999:02 2003:05 Observations 52 Mean 107.8734 Median 96.98600 Maximum 194.4840 Minimum 76.74100 Std. Dev. 25.79040 Skewness 1.320307 Kurtosis 4.487290 Jarque-Bera 19.90055 Probability 0,000048 A= 2.237236 (p = 0.0000), Z, = 3.88, Z 6.60 skewness ‘Aurtosis Exhibit 2.2 E-views output descriptive statistics for the first differences of stock price index of India Series ; INDIA] Sample 1999;02 2003:05 Observations 52 Mean 0.029077 Median -0,221500 Maximum — 30,10300 Minimum —_ -28,01300 Std. Dev. 11,0057] Skewness — 0.057344 Kurtosis 3.374301 dJarque-Bera 0.332052 Probability 0.847024 =-0.17,Z, = 4.96 ‘kurtosis 2 = 0.194136 (p = 0.8884), Z ‘skewness Exhibit 2.3 E-views output descriptive statistics for the EMF index Series : EMF Sample 1999;02 2003:05 Observations 52 Mean 352.5908 Median 333.2790 Maximum 499.4040 Minimum 251.3950 Std. Dev. 65.98490 Skewness 0.683970 Kurtosis 2.527907 Jarque-Bera 4.537281 Probability 0.103453 400 450 500 = 2.01, Z, = 3.72 ‘kurtosis 2= 1.178582 (p = 0.0040), Z, kewness Exhibit 2.4 E-views output descriptive statistics for first differences of EMF index Series : EMFI Sample 1999:02 2003:05 Observations 52 Mean 0.413885 Median 1.818000 Maximum 54.72200 Minimum -48.04500 Std. Dev. 2416841 Skewness 0.061041 Kurtosis 2.538876 Jarque-Bera 0.493002 Probability 0.781531 A?= 0.223470 (p = 0.8162 ), Z, skewness =0.18, Z, = 3.73 kurtosis Exhibit 3.1 Time plot for the EMF index gi Pu, a = EMFIND "781,78 EMFI ue EMFINDEX Exhibit 3.2 Time plot for the stock price index of India Exhibit 6.1 Actual and forecast values of stock price of India compared 2007TTTTITTTIT Ta TTT TT TT] T| 200 TRO HEE HA LL il Lt gh Heats amen HLL HHL 169 40 TTT A r THT TH 140 120 120 100 7 Pe} 100 60 60 40 40 20 4-H | j | 420 2 13.57 91113 1817 192) 23 Ee D a H 35 3? G i x as ¥ 49 3° —— INDIAACTUA —— FORECAST Exhibit 6.2 Actual and forecast values of stock price of India compared (Forecast based on first difference series) aa Sa hee 180 IL FH A 180 160 HHH 160 140 LN 140 120 | 120 100 Afi nl + 100 80 i | 80 60+ - | ++ + 60 40 | | | 40 20 HHH ELT 29 TE | lle 1357.9 1113 15.17 19 21-23 28 27 2931 33.38 37 39 41 43 43-47 49 51 — INDIA! eee FORECAST
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