Empirical investigation on predictability of Indian and global stock indices a data mining approach

Abstract

There is a large body of research carried out suggesting the predictability of Stock markets Initially tests of predictability of stock market returns were motivated by market efficiency where it is assumed that predictability was inconsistent with constant stock market returns efficient markets paradigm Rey David 2004 For long it was thought that stock markets are not predictable at least in an economically significant manner Fama 1970 Lo and Maculay 1988 in their research paper claim that stock prices do not follow random walks and suggested considerable evidence towards predictability of stock prices Basu 1977 Fama French 1992 Lakonishok Schleifer Vishney 1997 in their various studies have carried out many cross sectional analysis across the globe and tried to establish the predictability of the stock prices Ferson Harvey 1991 showed that predictability in stock returns are not necessarily due to market inefficiency or over reaction from irrational investors but rather due to predictability in some newlineaggregate variables that are part of the information set newline newline