Title: Market anomalies and investor behaviour

Authors: Aditya Sharma; Arya Kumar; Arun Kumar Vaish

Addresses: Department of Finance and Accounting, Institute of Management, Nirma University, Ahmedabad, India ' Department of Economics and Finance, Birla Institute of Technology and Science, Pilani, Rajasthan, India ' Department of Economics and Finance, Birla Institute of Technology and Science, Pilani, Rajasthan, India

Abstract: Market anomalies hint at inefficiency of stock markets. The research on the root cause of market anomalies points from time to time towards investor behaviour. The paper contributes to the research through investigation of the existence and probable source of three key anomalies in Indian stock markets, namely: momentum, size and value anomaly. The paper adopts Jegadeesh and Titman's methodology for finding the existence and Du and Watkin's decomposition technique for exploration of sources. The paper develops different strategies in order to calculate excess returns utilising these anomalies and decomposes the obtained profit to test for the sources. The results obtained point towards multiple sources indicating the role of investor behaviour along with the risk factors as the underlying cause. The overall contribution of the paper is highlighting the inefficiency in Indian stock markets while also pointing towards a certain influence of investor behaviour in Indian equity markets.

Keywords: stock price movement; momentum effect; under and overreaction; investor behaviour.

DOI: 10.1504/AAJFA.2022.121768

Afro-Asian Journal of Finance and Accounting, 2022 Vol.12 No.1, pp.62 - 81

Received: 19 Jul 2019
Accepted: 23 Apr 2020
Published online: 07 Apr 2022 *

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