An analysis of pricing efficiency of exchange traded funds in India using ARDL bounds test approach
Buvanesh Chandrasekaran; Rajesh H. Acharya
Afro-Asian J. of Finance and Accounting, Vol. 11, No. 4 (2021) pp. 607 - 633
This paper analyses the pricing efficiency of exchange traded funds (ETFs) in India. In order to achieve the objective, the study employs the autoregressive distributed lag (ARDL) model - bounds test approach. The study includes 14 equity ETFs for the time period from the inception date of each ETF to December 2016. An attempt has been made to establish long-run relationship between the closing price of ETFs and closing index values using ARDL model. The study also analyses the research question in the presence of single and multiple structural breaks. Empirical results of the study show that the absolute pricing deviation is relatively small in the case of ETFs. Most of the ETFs have long-run relationship with the underlying index. The study confirms structural breaks in the ETF closing price time series. With the introduction of structural breaks, increase in the size of statistically significant long-run coefficients indicates an improvement in the speed of correction to the equilibrium level.
Tag: India
Do demand curves for stocks slope down? – new evidence from a unique event in India
Do demand curves for stocks slope down? - new evidence from a unique event in India
Srikanth Parthasarathy
Afro-Asian J. of Finance and Accounting, Vol. 11, No. 4 (2021) pp. 561 - 582
The objective of this study is to examine the price and non-price effects of the constituent stocks following the change of the computation methodology of S&P CNX Nifty index from full market capitalisation weighted methodology to the free float market capitalisation weighted methodology in June 2009 in order to resolve whether the demand curves for stocks slope down. This study has followed methodology similar to that of Kaul et al. (2000). The event methodology is used along with cross sectional regressions associating abnormal returns and demand shift. Overall, the empirical evidence in this study supports the downward sloping demand curves for the stocks. The results have implications for one of the basic assumptions in the finance theory, regulators, investors, index providers and managers. To the best of the author's knowledge, this is the first study to examine the slope of demand curves, in such a unique setting without information content.
Financial restructuring of firms under weak bankruptcy laws – an Indian experience
Financial restructuring of firms under weak bankruptcy laws - an Indian experience
Smita Mazumdar; Anupam Rastogi
Afro-Asian J. of Finance and Accounting, Vol. 11, No. 4 (2021) pp. 518 - 536
This paper empirically investigates behaviour of firms with respect to capital utilisation under a weak insolvency and bankruptcy law using Indian corporate data over a period of 2000-2014. It suggests that firms resorted to higher borrowings after being subjected to restructuring under the corporate debt restructuring mechanism - an informal arrangement supported by the Reserve Bank of India. While firms managed to obtain more debt from lenders thereby signalling the possibility of recovery, we do not find any improvement in firm profitability post financial restructuring. This indicates that lenders in countries with weak insolvency regime postpone the day of reckoning. The empirical evidence corroborates the theory of agency cost of debt and the signalling hypothesis in the change in capital structure of firms.
Impact of corporate governance on dividend policy in India
Impact of corporate governance on dividend policy in India
Pankaj Chaudhary; Narain Chandra
Afro-Asian J. of Finance and Accounting, Vol. 11, No. 3 (2021) pp. 337 - 352
The basic objective of this study is to analyse the impact of corporate governance system on the dividend payment for Indian firms. We have taken the data for non-financial group A companies of BSE for the time period pertaining to 2010-2017. The corporate finance data is ridden with the endogeneity problem and in order to deal with this issue, we have applied dynamic panel data system to study the relationship between governance system and dividend payments in India. We find that the firms with strong corporate governance pay higher dividends as compared to the weak governance system firms. The board size is positively related to the payment of dividends and promoters' shareholding is negatively related to the dividend payments.
Active trading strategies based on momentum and term structure signals in commodity futures market: evidence from India
Active trading strategies based on momentum and term structure signals in commodity futures market: evidence from India
Ritika Jaiswal
Afro-Asian J. of Finance and Accounting, Vol. 11, No. 1 (2021) pp. 131 - 150
This research designs an active double-sort strategy which integrates both momentum and term structure signals present in the commodity futures market. By using a sample of highly traded commodity future contracts of the Indian commodity market from 2006 to 2016, this study confirms the exceptionally high abnormal profitability of the double-sort strategy. The abnormal returns of the double-sort portfolios are robust to transaction costs incurred for designing these active strategies. The application of a conditional multi-factor model and sub-sample analysis suggests that the return profile of these strategies is basically time-varying. Moreover, the low and insignificant correlation of double-sort portfolios with stocks and bonds confirms that relative strength portfolios of commodity futures can be effectively used to create a well-diversified portfolio.
The stability of money demand in India in the post reform period: an empirical analysis
The stability of money demand in India in the post reform period: an empirical analysis
Mohammad Asif; Rana Afreen
Afro-Asian J. of Finance and Accounting, Vol. 10, No. 3 (2020) pp. 364 - 379
This paper provides an empirical analysis of the stability of demand for money in India using ARDL cointegration framework. The study of stability of money demand plays an important role in deciding the appropriate instruments of monetary policy. The present study examines the demand for money by using annual data over the period 1991-2015. The ARDL model bound test procedure has confirmed that a stable, long relationship exists between M1 and its determinants such as income, interest rates, exchange rates and inflation. Through results we conclude that income elasticity coefficient is positive and significant while the coefficient of inflation and interest rate is negative. Based on the Bahmoni-Oskooee and Pourhedrian (1990) argument, exchange rates negatively affect the demand for money. This study also examines the cointegration in the presence of structural break by using Gregory-Hansen single structural break approach. The study does not find any cointegration in presence of single structural break. Our result also reveals that M1 is stable between the sample period when we incorporated the CUSUM and CUSUMSQ tests.
Value relevance of reported financials of NSE listed companies
Value relevance of reported financials of NSE listed companies
Mwila J. Mulenga; Meena Bhatia
Afro-Asian J. of Finance and Accounting, Vol. 10, No. 3 (2020) pp. 295 - 319
The purpose of this paper is to examine value relevance of accounting information in Indian stock market. The study focuses exclusively on the listed firms under Nifty 100 from 2001 to 2015, and uses price and returns models. The findings under both models suggest that accounting information has the significant ability in influencing stock prices and stock returns during the entire period covered by this study. Further analysis shows that book value per share is more relevant for loss-making firms while earnings per share are more relevant for profit-making firms. Based on industry classification, the value relevance of accounting information reported is high in metal industry, infrastructure, energy, financial services, automobiles and services industry and low in consumption and pharma industry. Study concludes that accounting information is relevant for investment decisions and investors must focus on this information to make informed investment decisions.
Impact of monetary policy announcements on bank index in India
Impact of monetary policy announcements on bank index in India
Sushma Priyadarsini Yalla; Karuna Jain; Som Sekhar Bhattacharyya
Afro-Asian J. of Finance and Accounting, Vol. 10, No. 1 (2020) pp. 112 - 130
Understanding the impact of monetary policy announcements on systemic risk and abnormal returns (ARs) of banking sector indexes is important to assess the changes in the cost of equity capital and arrive at a fair rate of return of bank stocks. Empirical studies of this nature from the Indian context are scarce. The present study analyses the impact of monetary policy announcements on systemic risk and abnormal returns of bank index in India. Capital asset pricing model (CAPM) along with Kalman filter was used to estimate the daily systemic risk (beta) and abnormal returns. Ordinary least squares (OLS) regression and event study methodology were used to assess the impact of monetary policy announcements on systemic risk and abnormal returns.
Technical analysis and National Stock Exchange of India: testing the RSI rule using CNX Nifty index
Technical analysis and National Stock Exchange of India: testing the RSI rule using CNX Nifty index
Esha Jain
Afro-Asian J. of Finance and Accounting, Vol. 9, No. 4 (2019) pp. 406 - 419
Technical analysis is just a strategy for seeing if it worth purchasing or offering a stock. This review can be made on the premise of information that is produced through the activities of the general population in the market. Technical analysis attempts to quantify the aggregate mind of the speculators which is led by covetousness and dread. The essential starting point under which specialised investigation works is the investigation of interest and supply, past costs and volume in the market and the heading of the value incline thereof later on. This study is significant for investors and traders as it leads to identify the level of price movement that further helps in understanding buying and selling situations in the market by identifying support and resistance levels. The results of the study show that the RSI test is reliable for any investor while trading in stock market.