Market State and Investment Strategies: Evidence from the Indian Stock Market

This study contributes to the growing literature on momentum and overreaction effect by investigating the same within the framework of the Indian stock market. Based on the most adopted methodology that employs monthly data, the empirical results derived confirm the existence of momentum and long-term overreaction effect in the Indian stock market. The overall results from the study are consistent with DeBondt and Thaler (1985) and Jegadeesh and Titman (1993) findings for the US stock market. In addition, we tested the profitability of momentum and contrarian strategies under different market states. The results indicated a strong relationship between the state of the market and momentum profitability, wherein strong momentum profits were observed following an ‘up’ market. On the contrary, long-term contrarian strategies were found to be stronger following a ‘down’ market in the Indian stock market. The market-dependent asset pricing model failed to explain excess momentum profits in the Indian stock market. The evidence from the study provides partial support to various behavioural models to explain these effects in the Indian stock market. However, there exists a need to develop a single behavioural model that could explain these anomalies completely in the emerging markets like India.

Simulation of a propelled wake with moderate excess momentum in a stratified fluid

Direct numerical simulation is used to simulate the turbulent wake behind an accelerating axisymmetric self-propelled body in a stratified fluid. Acceleration is modelled by adding a velocity profile corresponding to net thrust to a self-propelled velocity profile resulting in a wake with excess momentum. The effect of a small to moderate amount of excess momentum on the initially momentumless self-propelled wake is investigated to evaluate if the addition of excess momentum leads to a large qualitative change in wake dynamics. Both the amount and shape of excess momentum are varied. Increasing the amount of excess momentum and/or decreasing the radial extent of excess momentum was found to increase the defect velocity, mean kinetic energy, shear in the velocity gradient and the wake width. The increased shear in the mean profile resulted in increased production of turbulent kinetic energy leading to an increase in turbulent kinetic energy and its dissipation. Slightly larger vorticity structures were observed in the late wake with excess momentum although the differences between vorticity structures in the self-propelled and 40 % excess momentum cases was significantly smaller than suggested by previous experiments. Buoyancy was found to preserve the doubly inflected velocity profile in the vertical direction, and similarity for the mean velocity and turbulent kinetic energy was found to occur in both horizontal and vertical directions. While quantitative differences were observed between cases with and without excess momentum, qualitatively similar evolution was found to occur.