Understanding Distribution Pattern of Banking Sector Stock Prices in Indian Stock Market

Abstract

The Indian stock market prices, which have been mostly tracked and understood by various techniques, were assumed to follow the normal distribution properties. The pattern of stock price returns of different companies was assumed to fit the same normal Gaussian distribution in analyzing their properties in most of the studies. Prediction of future movements with their probabilities was also calculated and the various graphs also interpreted. The hierarchies of the distributions, which will best fit the stock price returns, were also analysed by conducting suitable tests. Stable distributions which handle skewed data with heavy tails were read and understood in detail and their various forms analyzed alongside their parameters. The parameters with their values were interpreted and the top three distributions for each of the companies explained. This paper comes out with the understanding of the different distributions that might explain the stock price returns of banking companies and hence should also help in predicting future movement for fund manager. The research generates that burr, dagum, log logistic and Cauchy distribution are almost common factors in fitting the data values.