Predictability of stock price patterns following large price changes in the Indian market
Abstract
The key objective behind the study is to develop our own trading strategy on the basis of the
predictability of the Indian equities market. Since the literature on predictability following large
price movements is not as abundant as in the case of the developed markets, we went ahead with
data analysis on our own to develop insights. With the study, we wanted to look at the
predictability, reasons for the same, and the possibility and quantum of return from the strategy, if
any. We also wanted to look at the variations we will have to make in the strategy based on the
direction of price movement and the industry to which the stock with the large price movement
belongs.
As a part of the study, we also wanted to look at asymmetry in market movements due to the risk averse
nature of investors. With the study, we also wanted to look at behavioral reasoning and how
the entire scenario fits into the context of the Efficient Market Hypothesis.
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