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Determining speed of Adjustment Coefficient: A Study of NSE


Affiliations
1 Department of Management, Uka Tarsadia University, Bardoli, India
     

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The study employs ARMA (1,1) model to estimate speed of adjustment coefficients in S&P CNX Nifty during 2004-2013. The sub-sample analysis reveals the evidence of overreaction in NSE during 2004-2008. The findings suggest that prices are speedily adjusting to intrinsic values during 2009-2013 for the stock market. It seems that the steps taken by the stock exchanges to reform market microstructure have led to improvement in speed of adjustment coefficients.

Keywords

Speed of adjustment, Underreaction, Overreaction
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  • Determining speed of Adjustment Coefficient: A Study of NSE

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Authors

Prashant Joshi
Department of Management, Uka Tarsadia University, Bardoli, India

Abstract


The study employs ARMA (1,1) model to estimate speed of adjustment coefficients in S&P CNX Nifty during 2004-2013. The sub-sample analysis reveals the evidence of overreaction in NSE during 2004-2008. The findings suggest that prices are speedily adjusting to intrinsic values during 2009-2013 for the stock market. It seems that the steps taken by the stock exchanges to reform market microstructure have led to improvement in speed of adjustment coefficients.

Keywords


Speed of adjustment, Underreaction, Overreaction