SFIMAR Research Review

Open Access Open Access  Restricted Access Subscription or Fee Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription or Fee Access

Anomalies in the Indian Stock Market


Affiliations
1 St Francis Institute of Management and Research, India
     

   Subscribe/Renew Journal


The paper studies three anomalies in the Indian equity market - size, value and price movement after dividend announcement. The size anomaly delivered positive returns, value anomaly has not delivered positive returns in the period of study. While the entire period average return to value anomaly is negative, maximum returns delivered by the anomaly is approximately 18%. Also, dividend announcements affect the returns reflected in the stock price changes in some days. Having said that returns to these anomalies are transitory.
User
Subscription Login to verify subscription
Notifications
Font Size

  • Acharya V. V., Pedersen L. H., Asset pricing with liquidity risk, Journal of Financial Economics, 77, 2005, pp. 375-410.

  • Banz, R.W. (1981). The relationship between return and market value of common stocks. Journal of Financial Economics, 9 ,3 -18.

  • Beck, T. and Levine, R. (2004). Stock Markets, Banks, and Growth: Panel Evidence. Journal of Banking and Finance, 24 (3), 423-442 .

  • Black, Fisher, Michael C. Jensen & Myron Scholes. 1972. "The Capital Asset Pricing Model: Some Empirical Tests," in Studies in the Theory of Capital Markets. Michael C. Jensen, ed. New York: Praeger, pp. 79-121 .

  • Brown, P, A. Kleidon and T. Marsh. (1983). New evidence on the nature of size-related anomalies in stock prices. Journal of Financial Economics, 12, 13-32.

  • Capitaline Databases. (2016). Corporate database. Retrieved from Capitaline, Databases : http://www.capitaline.com.

  • Chander, R., Sharma, R., & Mehta, K. (2007). Dividend announcement & Informational efficiency: An empirical study of Indian stock market. The ICFAI Journal of Applied Finance, 13,29-42.

  • Chatfield, C. The Analysis of Time Series: An Introduction. London: Chapman and Hall, 1980.

  • Cootner, P, 1964, Stock prices: Random vs. systematic changes, in: Paul H. Cootner, ed., The random character of stock market prices (MIT Press, Cambridge, MA) 231 -252.

  • Dasilas, A., Lyroudi, K., & Ginoglou, D. (2008). Joint Effects of Interim Dividends and Earnings Announcement in Greece. Studies in Economics and Finance, 25 (4), 212-232.

  • Eugene F. Fama and Kenneth R. French, A Five-factor Asset Pricing Model, Journal of Financial Economics, Vol 116,2015, pp. 1-22.

  • Fama, E. (1965). The behaviour of stock market prices. The Journal of Business, 38 (1), 34 -105.

  • -------- (1970). Efficient capital markets: A review of theory and empirical work. Journal of Finance, 25 (2), 383-417 .

  • -------- (1991). Efficient capital markets. The Journal of Finance, 46 (5), 1575-1617.

  • Goldsmith, R.W. (1969). Financial Structure and Development. New Haven: Yale University Press.

  • Gunasekarage, A., & Power, D. M. (2006). Anomalous Evidence in Dividend Announcement Effect. Managerial Finance, 32 (3), 209-226.

  • Harvey C. R., Lundblad C. and Bekaert G ., Liquidity and Expected Returns: Lessons from Emerging Markets, The Review of Financial Studies, Vol. 20 No. 5, 2007, pp 1784-1831.

  • Iqbal & Mallikarjunappa, T. (2008). An Empirical Testing Of Semi-Strong Form Efficiency O f Indian Stock Market. The Journal of Amity Business School, 9 (1), 24-33.

  • J. Tobin, Liquidity Preference as Behavior Towards Risk, The Review of Economic Studies, Vol. 25, No. 2 (Feb., 1958), pp. 65-86.

  • Jensen, Michael C ., 1986, "Agency costs of free cash flow, corporate finance, and takeovers," The American Economic Review 76(2), 323-329.

  • Khan, A. Q ., Ikram, S., and Mehtab, M. (2011). Testing weak form market efficiency of Indian capital market: A case of National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). African Journal of Marketing Management, 3 (6), 115-1 2 7 .

  • Kumar, S. & Raju, G. (2013). Does the Dividend Announcement matter in the Indian Stock Market? Asia Pacific Journal of Management Research and Innovation, 9 (1), 1 -7.

  • Lane. (2012). Financing Commodities Markets presented to the CFA Society of Calgary. Calgary, Alberta.

  • Maitra, D. & Dey, K. (2012). Dividend Announcement and Market Response in Indian Stock Market: An EventStudy Analysis. Global Business Review, 13 (2), 269-283.

  • Mallikarjunappa, T. and D'Souza, J. J. (2015). Does the Indian Stock Market Exhibit Random Walk? Paradigm, 19(1),1 -2 0 .

  • Mallikarjunappa, T. & Manjunatha, T. (2009). The stock price reaction to dividend announcements. Journal of Management&Public Policy, 1 (1), 43-56.

  • Markowitz, H., 1959, Portfolio selection: Efficient diversification of investments (Wiley, New York) and Markowitz, H., 1991, "Foundations of Portfolio Theory", Journal of Finance 46,469-477.

  • McKinnon, R. (1973). Money and Capital in Economic Development. Washington, D .C .: Brookings Institution.

  • Mehta, C ., Jain, PK. & Yadav, S.S. (2014). Market Reaction to Stock Dividends: Evidence from India. Vikalpa 39 (4), 55-74.

  • Nisar, S., and Hanif, M. (2012). Testing weak form of efficient market hypothesis: Empirical evidence from South-Asia. World Applied Sciences Journal, 1 7 (4), 414-427 .

  • NSE. (2018). NIFTY 100 Index Fact Sheet. Retrieved from https://www.nseindia.com/products/content/ equities/indices, htm.

  • Osborne, M., 1959, Brownian motion in the stock market, Operations Research, March-April, 145-1 73.

  • Palamalai, S. and Kalaivani, M. (2015). Are Indian Stock Markets Weak-Form Efficient? Evidence from NSE and BSE Sectoral Indices. IUP Journal of Financial Risk Management, 12 (4), 7 -3 4 .

  • Pinto, P, Ajaya and Menezes, P (2012). A Study on Random Walk of Equity Futures Market with Reference to National Stock Exchange, India. Retrieved from www.mirlabs.net/ictl 2/download/Paper21 .pdf.

  • Reinganum, M.R. (1981). Misspecification of capital asset pricing: Empirical anomalies based on earnings yields and market values. Journal of Financial Economics, 9,1946.

  • RBI. (2016). Annual Report of the RBI. Retrieved from https://www.rbi.org.in/Scripts/AnnualReportMainDispl ay.aspx.

  • R. Hicks, Value and Capital (New York: Oxford University Press, 1939), p. 126. Applies to firm specific risk ratherthan a portfolio.

  • Robert C. Merton, An Intertemporal Capital Asset Pricing Model, Econometrica,41,1 9 7 3 , pp. 867-887.

  • Rousseau, RL. and Wachtel, P (2000). Equity Markets and Growth: Cross-country Evidence on Timing and Outcomes, 1980-1995. Journal of Banking and Finance, 2 4 ,1 9 33 -1 9 5 7.

  • Samuelson, R (1965). Proof that Properly Anticipated Prices Fluctuate Randomly. Industrial Management Review, Spring 6,41 -49.

  • Seghal, S. & Bijoy, K. (2015). Stock Price Reactions to Earnings Announcements: Evidence from India. Vision: The Journal of Business Perspective, 19 (1), 25-36.

  • Sharma, J. & Singh, S. (2009). Market Reaction to Bonus Issues in the Indian Stock Market. Asia Pacific Journal of Management Research and Innovation, 5 (3), 56-62.

  • Sharma, R. & Chander, R. (2009). Earnings Behaviour and Stock Price Behaviour on Indian Stock Markets. Asia Pacific Journal of Management Research and Innovation, 5 (3), 11 7-126.


Abstract Views: 202

PDF Views: 1




  • Anomalies in the Indian Stock Market

Abstract Views: 202  |  PDF Views: 1

Authors

Shilpa Peswani
St Francis Institute of Management and Research, India
Smita Jesudasan
St Francis Institute of Management and Research, India

Abstract


The paper studies three anomalies in the Indian equity market - size, value and price movement after dividend announcement. The size anomaly delivered positive returns, value anomaly has not delivered positive returns in the period of study. While the entire period average return to value anomaly is negative, maximum returns delivered by the anomaly is approximately 18%. Also, dividend announcements affect the returns reflected in the stock price changes in some days. Having said that returns to these anomalies are transitory.

References