An Analysis of Lead-Lag Relationship Between Stock Returns Using Spectral Methods

Download or read book An Analysis of Lead-Lag Relationship Between Stock Returns Using Spectral Methods written by Avishek Bhandari and published by . This book was released on 2020 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationship between BSE Sensex and three other developed markets in the frequency domain. Cross-spectral methods, which are important in discovering and interpreting the relationships between economic variables, are used to analyze the relationships between different price series. Cross-spectral methods, developed using Fourier techniques, give valuable information regarding the correlation structure in the frequency domain. This paper applies these methods to study the lead-lag relationship between BSE Sensex and other international markets. The results show no significant co-movement of Indian stock prices with developed market prices at lower frequencies; and in the long run, the developed stock markets seem to lead Indian market. However, in the short run, some evidence of behavioral similarities is observed.