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Working Papers | 2005

Portfolio Allocation with Heavy-tailed returns

A. K. Laha, Bhowmick Divyajyoti, and Subramaniam Bharathy

In this paper we propose two new methods of portfolio allocation which are applicable for all return distributions. The properties of these new methods are compared with that of Markowitzs mean-variance method using extensive simulation. It is found that the new methods perform appreciably in terms of growth of wealth as well as protecting against the downside risk, in situations where the return distributions of one or more of the stocks is heavy-tailed. These methods can be effective substitutes for the mean-variance method which is not applicable for return distributions with heavy-tails having infinite expectation or variance. Note: For softcopy of this paper, please contact the authors - email: arnab@iima.ac.in

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Working Papers | 2005

Role of Alternative Dispute Resolution Methods in Development of Society: `Lok Adalat ' in India

Anurag K. Agarwal

Peace is the sine qua non for development. Disputes and conflicts dissipate valuable time, effort and money of the society. It is of utmost importance that there should not be any conflict in the society. But, in a realistic sense, this is not possible. So, the next best solution is that any conflict which raises its head is nipped in the bud. With the judicial system in most of the countries being burdened with cases, any new case takes a long time to be decided. And, till the time the final decision comes, there is a state of uncertainty, which makes any activity almost impossible. Commerce, business, development work, administration, etc., all suffer because of long time taken in resolving disputes through litigation. To get out of this maze of litigation, courts and lawyers' chambers; most of the countries encourage alternative methods of dispute resolution. India has a long tradition and history of such methods being practiced in the society at grass roots level. These are called panchayat and in the legal terminology, these are called arbitration. These are widely used in India for resolution of disputes-both commercial and non-commercial. Other alternative methods being used are Lok Adalat (People's Court), where justice is dispensed summarily without too much emphasis on legal technicalities. Methods like negotiation, mediation and conciliation are being increasingly used to resolve disputes instead of going for litigation. There have been recent amendments in the procedural law of India to incorporate these methods so that people get justice in a speedy manner and there is lesser conflict in the society. This paper examines the role of methods of alternative dispute resolution, particularly Lok Adalat in making inexpensive, efficacious and speedy justice accessible to the public. The Constitution of India guarantees 'Right to Constitutional Remedies' as a fundamental right. The government provides free legal aid to the needy. However, in a country of continental dimensions and with population more than a billion, it becomes very difficult to provide free legal aid to everyone. The National Legal Services Authority (NALSA) is trying to spread 'legal literacy' which is a step more than 'literacy'. People care about their rights much more when they are aware and are 'legal literate'. Efforts are also being done at provincial level. The paper particularly examines the role of NALSA and other State Legal Services Authority which are the key institutions in bridging the gap between public and judicial system. The author has personal experiences regarding the same. All these efforts seem to be a small drop in the ocean, but small drops make mighty oceans. How can these be replicated in other parts of India and similar models developed and adopted in Asia-Pacific countries is a good research area. Such models shall curb conflicts and bring more peace in society-not only in domestic sense but also internationally.

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Working Papers | 2005

Competition Law in India: Need to Go Slow and Steady

Anurag K. Agarwal

The globalized and liberalized Indian economy is witnessing cut-throat competition. To provide institutional support to healthy and fair competition, there is a requirement of better regulatory and adjudicatory mechanism. To this effect, India has enacted the new competition law which shall replace the earlier law. This is a shift from curbing monopolies to encouraging competition. The design of the new law carves out a very important role for the Competition Commission of India (CCI). The task has been divided in three phases. This article sets out to explain the intricate relationship of competition law and judiciary in India by examining the experience CCI had so far. The article then goes on to examine the role of lawyers. The article then considers the time frame for the implementation of the three phases and provides realistic suggestions to have a successful setting of competition regime in India.

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Working Papers | 2005

Performance of Nonparametric Control Charts

A. K. Laha, Gupta Divesh, and Choubey Anant

The well known Shewharts control chart for mean is constructed under the assumption that the distribution of underlying quality characteristic is normal. It is known that the performance of this control chart is seriously degraded if the underlying distribution is different from normal. Since in many real life situations the distribution of the quality characteristic is not known several authors have suggested use of nonparametric control charts. In this paper we use simulation to study the performance of three of these nonparametric control charts: the median chart (Janacek and Meikle, 1997), the boostrap control chart (Liu and Tang, 1996) and Hodges-Lehmann control chart (Alloway and Raghavachari, 1991) for different distributions of the quality characteristic. The in-control and out-of-control run length properties of these charts are compared against that of the control chart for mean with estimated control limits. The run length properties of all these control charts are found to be dependent on the reference sample drawn. The Hodges-Lehmann control chart is seen to perform best among all the charts considered in this study. Note: For softcopy of this paper, please contact the authors - email: arnab@iima.ac.in

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Working Papers | 2005

Impact of Performance and Expressiveness Value of Store Service Quality on the Mediating Role of Satisfaction with Store

Kaul Subhashini

This study explores the extent to which store service attributes having appeal for consumer self-image impacts store satisfaction and patronage intentions and discovers that this "expressiveness" value has significant associations with both. By using the adapted RSQS for measuring service quality in the Indian appare! retail context, this paper finds that service expressiveness value is distinct from the performance value obtained from service delivery. This paper provides empirical evidence that the mediation effect of satisfaction varies depending on consumer perceived value from service and that it is neither as universal nor as strong as retailers and researchers lend to believe.

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Working Papers | 2005

Measuring Retail Service Quality: Examining Applicability of International Research Perspectives in India

Kaul Subhashini

Service quality measures developed internationally are often accepted as adequate in India. This study evaluates the Retail Service Quality Scale (RSQS) developed in the U.S. and considered valid across a variety of formats and cultural contexts. Confirmatory factor analysis of the component structures using AMOS 4.0 indicates the RSQS dimensions are not valid in India. This lowers the diagnostic ability of the scale for identifying areas requiring strategic focus. This study argues for further research and extensive scale adaptation before scales developed in other countries such as the RSQS are applied in the Indian context.

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Working Papers | 2005

Artificial Neural Network Models for Forecasting Stock Price Index in Bombay Stock Exchange

Mohan Neeraj, Jha Pankaj, A. K. Laha, and Goutam Dutta

Artificial Neural Network (ANN) has been shown to be an efficient tool for non-parametric modeling of data in a variety of different contexts where the output is a non-linear function of the inputs. These include business forecasting, credit scoring, bond rating, business failure prediction, medicine, pattern recognition, and image processing. A large number of studies have been reported in the literature with reference to use of ANN in modeling stock prices in the western countries However, not much work along these lines has been reported in the Indian context. In this paper we discuss modeling of Indian stock market (price index) data using ANN. We study the efficacy of ANN in modeling the Bombay Stock Exchange (BSE) SENSEX weekly closing values. We develop two networks with three hidden layers for the purpose of this study which are denoted as ANN1 and ANN2. ANN1 takes as its inputs the weekly closing value, 52-week Moving Average of the weekly closing SENSEX values, 5-week Moving Average of the same, and the 10-week Oscillator for the past 200 weeks. ANN2 takes as its inputs the weekly closing value, 52-week Moving Average of the weekly closing SENSEX values, 5-week Moving Average of the same, and the 5-week volatility for the past 200 weeks. Both the neural networks are trained using data for 250 weeks starting January, 1997. To assess the performance of the networks we used them to predict the weekly closing SENSEX values for the two year period beginning January, 2002 The root mean square error (RMSE) and mean absolute error (MAE) are chosen as indicators of performance of the networks. ANN1 achieved an RMSE of 4.82% and MAE of 3.93% while ANN2 achieved an RMSE of 6.87% and MAE of 5.52%.

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Working Papers | 2005

Measuring Consumer Preferences for Sales Promotion Schemes through Conjoint Design in FMCG Sector

Vyas Preeta H

Fast moving consumer goods in India is characterized by intense competition leading to brand proliferation in various categories. Using consumer sales promotion to differentiate ones offer has been a common practice in matured urban markets. More and more budget is allocated to these activities in order to lure the consumers. In such a scenario, it is very essential to study how consumers make their choices in FMCG category where there are several brands in the consideration set of a consumer. The financial risk being low consumers do not mind switching from one brand to another due to sales promotion offer. Hence it would be of interest to a marketer to learn about consumer preferences with respect to sales promotion offers; what schemes do consumers prefer for what kind of brands, which media they prefer to learn about the schemes, whether they prefer incentive immediately or at a later date. It was found that deal proneness prevailed across different demographic segments. Price cut nature of promotions was found to be preferred. Out of the nine concepts presented to the respondents; they preferred a price cut nature of promotion on a national brand with an immediate incentive and awareness created at point of purchase. The study would provide insights to a brand manager in designing a scheme.

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Working Papers | 2005

Trends in Regional Disparity in Human and Social Development in India

Ravindra H. Dholakia

In the present paper, we have examined trends in regional disparity in human and social development by considering numerous indicators other than State Income. We found no support to the general impression prevailing in the recent literature that disparity is increasing over the last two decades when we subjected the trend to statistical significance test. We considered numerous output as well as the input indicators for the purpose. In very few indicators, the disparity showed an increase, whereas in a large number of indicators it either remained the same or actually declined over the last two decades. The state governments' efforts in the social sectors were perhaps a major reason for the outcome. Except education, in all other social sub-sectors, the interstate disparity in the government effort markedly declined during the 1990s compared to the 1980s. In education, it remained the same. Our findings in this paper point to a very clear policy prescription. The social and human development is considered by all the state governments as very important and a priority sector in their development strategy. The way they are making efforts in these directions is reducing disparity across states although each state has been acting on its own. This is perhaps because of the felt need of people and the polity in states. Explicit objective of reducing regional disparity in social and human development in the central planning may not, therefore, be specially required. Augmenting the revenue resources of states allowing the states to access public borrowings directly would enable most of them to concentrate on their priority areas-based on the local felt need. It is likely to address the issue of regional imbalance and disparity in a much better and efficient way without imposing excess burden since it would allow exploiting complementarities in growth and equity.

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Working Papers | 2005

Bayesian Analysis of Rank Data using SIR

A. K. Laha and S. Dongaonkar

Rank data occurs quite regularly in the context of market research studies, opinion polls, sports, etc. In this paper, we discuss the problem of estimation of the true rank when the rank given by the respondents are subject to error. Various error structures are discussed like, transposition errors, cyclic errors etc. and methods to analyze data with these error structures are derived. Analysis of data with a completely general error structure is also discussed. It is seen that in all the cases considered, the posterior marginal distribution of the true rank can be conveniently obtained using Sampling Importance Resampling (SIR) technique. A real life rank data set is analysed to illustrate the methodology. Note: For softcopy of this paper, please contact the authors - email: arnab@iima.ac.in

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