Long memory investigation during demonetization in India

Title

Long memory investigation during demonetization in India

Creator

Ghosh B.; Saleema J.S.; Oak A.; Manu K.S.; Sangeetha R.

Description

Long-range dependence (LRD) in financial markets remains a key factor in determining whether there is market memory, herding traces, or a bubble in the economy. Usually referred to as 'Long Memory', LRD has remained a key parameter even today since the mid-1970s. In November 2016, a sudden and drastic demonetization measure took place in the Indian market, aimed at curbing money laundering and terrorist funding. This study is an attempt to identify market behavior using long-range dependence during those few days in demonetization. Besides, it tries to identify nascent traces of bubble and embedded herding during that time. Auto Regressive Fractionally Integrated Moving Average (ARFIMA) is used for three consecutive days around the event. Tick-by-tick data from CNX Nifty High Frequency Trading (CNX Nifty HFT) is used for three consecutive days around demonetization (approximately, 5000 data points from morning trading sessions on each of the three days). The results show a clear and profound presence of herd behavior in all three data sets. The herd intensity remained similar, indicating a unique mixture of both 'Noah Effect' and 'Joseph Effect', proving a clear regime switch. However, the results on the event day show stable and prominent herding. Mandelbrot's specified effects were tested on an uncertain and sudden financial event in India and proved to function perfectly. Bikramaditya Ghosh, Saleema J. S., Aniruddha Oak, Manu K. S., Sangeetha R., 2020.

Source

Investment Management and Financial Innovations, Vol-17, No. 2, pp. 297-307.

Date

2020-01-01

Publisher

LLC CPC Business Perspectives

Subject

Bubble; Demonetization; Herd behavior; Joseph Effect; Noah Effect

Coverage

Ghosh B., Institute of Management, Christ University, India; Saleema J.S., Department of Computer Science, Christ University, India; Oak A., Institute of Management, Christ University, India; Manu K.S., Department of Management Studies, Christ University, India; Sangeetha R., Department of Management Studies, Christ University, India

Rights

All Open Access; Gold Open Access

Relation

ISSN: 18104967

Format

Online

Language

English

Type

Article

Identifier

https://doi.org/10.21511/imfi.17(2).2020.23

https://www.scopus.com/inward/record.uri?eid=2-s2.0-85090214135&doi=10.21511%2fimfi.17%282%29.2020.23&partnerID=40&md5=a166b33a0160e6b314a6c35cd6be1858