Volatility Changes in the Indian Stock Market an Empirical Investigation

Abstract

This thesis examines the nature, timing, magnitude, and causes of volatility changes in the Indian stock market. For isolating variability changes in a sequence of independent stock returns, two distinct, yet complementary statistical procedures have been used: the Iterated Cumulative Sum of Squares (ICSS) algorithm which can isolate multiple variance change points through piecewise searches, thereby avoiding a masking effect; and, a class of flexible nonparametric rank tests which allow the researcher to specify a wide menu of alternatives to homoscedasticity: monotonic trends, stepchanges (at specified points) or cyclical tendencies. newlineFor conducting the analysis via the ICSS algorithm, 2200 daily returns of the Bombay Stock Exchange (BSE) newlineNational Index of Equity Prices over the period 1985-1994 have been employed. The rank. tests, on the other hand, are conducted on 597 daily returns on the BSE Sensitive Index of Equity Prices covering the sub-period 1990-1992. newlineNine points of variance change are identified by the ICSS algorithm. newline newline