The Assessment of Risk in the Four Segments of the Nse

Abstract

This research provides evidence that there is improvement of market efficiency ^ NSE and that the risk on the four segments of the NSE are not necessarily tltf *ame‘ They could be significantly different at times despite being in the $aille nrir^'1 findings arc based on Wednesday stock volumes and prices of f0r(v l*ste^ companies. Risk was calculated using two different approaches. The first onc f^use^ on the variance of returns from CAPM predictions while the otfier foclr’c* °n variance from the mean of the returns of a segment. This appro^ was ^ t0 conduct the first test that drew the conclusion that the NSE is improving jn cfjV’enC'' according to CAPM and that the variance reduced with time. ln ^ teSl ^ean absolute deviations were found by getting the difference between cOrr>panv rettij1is aS calculated by the Modigliani-Miller (1961) model and the returns Calcu|ateJ $ CAPM. The inter-weekly comparison of the changes in the mean absolute dev1^10^ was done using Z scores The second approach of risk was used to test whether the level of rj- j. ^ *oar segments of the NSE. This was done by finding the average segment return anj uSin^ it to find segment-based absolute deviations. These were then testC(j usim, ^ scores to test whether there were significant differences among the four SCgmctit*' Analysis results showed that though there was a wider variance between returns and the returns calculated from market prices, this variance tended to i1*1170'' towards the end of 2010. The inter-week Z-tests showed that prices \Vere ran(jcP *°r the variations in the mean absolute deviations were mostly not different |roni the preceding week. This indicated market efficiency. The findings of ^ SCC0I1J te>,tS showed that in 2006 the markets did not have significantly different levels 0f ri^ ^ut divergence increased in the later years with the A&AMS showing The FIMS and the MAIMS showed almost same levels of risk that vvCre and reducing. The risk level in the ALMS was not did not show a clear trencj onjy t^at 11 kept oscillating.