indianguy4u

have u read the full text, its 32 pg long.

__________________
Hala Madrid!!

Sameer

You think that i posted it out of the blue, i had to read this, i nver had a choice in the matter...

you cannot graduate without some reading about empirics you know.

Sameer

and indiaforu one of the main reasons for BSE performance over the last 3 years has been risk contraction, not speculation, speculation does not last that long and nor does it react this way when markets are down.

Favourable P/E ratios is also another reason.


Again i posted a good article about the BSE a few pages back.

Sameer

Varman when you say under the absense of other economic variables, noone ever doubted that more than one variable affects the economy which is why i never talked about it, too obvious, we are talking about a multilinear dmensional regression here.

Monk

I think you and sameer are on the same page here. It is not sameer's claim that stock market growth leads to economic growth, his claim is that stock market is a fair representation of the Economy. In the past with weak "soft" infrastructure of India this statement may have been false but today viewing India as a more mature market this statement is accurate. Therefore the laws of causality aren't breached and no A leads to B doesn't always mean B leads to A.

Your original statement(my emphasis) is delusional no one actually said that ergo all your arguments are futile.
Regarding 40-50 companies constituting an index, how do you think these companies were selected to be in the index in the first place, the basis if you will? They are leading companies in individual sectors, the term "Bellweather" ring a bell (unintended pun ). These companies represent individual sectors and logic follows that the index represents the economy. Therefore the stock market fairly reflects economy in India currently. No one said Stock market drives the economy.

__________________
"Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of Government except all those others that have been tried from time to time. "

"Although prepared for martyrdom, I preferred that it be postponed."

Sir Winston Churchill

Sameer

Vaman ji

The stock market is an indicator of how wel the economy is doing and there is evidence that it contributes to long term growth. Its not the only variable and never will be, it is an indicator and must be included in your empirical work.

In terms of India, the dynamics of the Indian economy have changed drastically over the years, there is currently work going on to study the stofk market phenomenon in India, you will have your question answered in a few years time.


The sensex is a statistically significant sample of the state of Indian companies in the organized sector.

Granger causality, sims test, cointergration are used to determine what variable causes what variable in a regression, ie which one is the dependent and which one is the independent variable, this was solved since the 60s and i have already posted Granger causality test and stock markets granger causes economic growth.

cheers

Sameer

I found this micky mouse website to help us out. its funny


What is the Sensex made of?

Thirty stocks. That's right. Just 30 stocks tell you how the market is faring.

Before you throw up your hands in protest, there is something you should know about these 30 stocks.

For one, they are the most actively traded stocks in the market. In fact, they account for half the BSE's market capitalisation (To understand the term market capitalisation, read What's in a share? Money!).

Besides, they represent 13 sectors of the economy and are leaders in their respective industries. Now that sounds fair, doesn't it?

Who selects these 30 stocks?

They are selected by the Index Committee.

This committee consists of all sorts of individuals including academicians, mutual fund managers, finance journalists, independent governing board members and other participants in the financial markets.

How do they select these 30 stocks?

Well, they definitely don't do it on the basis of their individual whims and fancies. Some of the criteria they follow include:

~ The stock should have been traded on each and every trading day (the days on which the stock market works) for the past one year.

~ It should be among the top 150 companies listed by average number of trades (buying or selling of shares) and the average value of the trades (in actual rupee terms) per day over the past one year.

~ The stock must have been listed on the BSE for at least one year.

Does the Sensex have any contemporaries?

In terms of age? No.

The Sensex is the oldest index in the country. It was born in 1986.

In terms of popularity, the Nifty follows close.

The Nifty? What's that?

Well, the National Stock Exchange has an index called the Nifty (officially called S&P CNX Nifty). This name can be credited to the 50 stocks that comprise its index.

Isn't that a broader representation than the Sensex?

You're right. The Nifty has 50 stocks covering 24 sectors, as against 30 stocks and 13 sectors for the Sensex.

In case you are shaking your head about 50 also being too small a number, let me remind you these 50 stocks account for around 60 percent of the market capitalisation.
http://in.rediff.com/getahead/2004/dec/10sensex.htm

Vaman

Pfffft!!!
That must be some kind of an average offer.

I dont care for what degrees you say you hold or what you claim. They might very very be legitimate, but internet being what it is anyone and everyone can claim to be whatever he/she desires.
Dont expect respect to be granted by me just because someone claims to be so-and-so in real life. It doesnt cut it for me. In the same tone, I will never claim to be so-and-so in real life and therefore my word be given more value.
I'd respect anybody on the other hand who shows an understanding of the issue and is able to offer atleast some insights. WRT to economics, some the best minds I have seen dont need to be propped up by jargon or overt dependence on mathematical desciption of an issue. They can do it in laymans terms and usually do it brilliantly.

Hey, I was still willing to concede that concurrence of events A and B could still yield something of use like say B follows A with a certain probablity. If I were to strictly stand by fundamental notions of Hume's causality, I wouldnt even grant that. Granger is someone who you would probably devote a few lines if a book were to be written on causality. The reason being science and maths havent been be explain the true nature of causality. They have only been able to do that in a wel defined,formal, enumerated systems. If these were to be taken away, even laws of induction - based on which mathematical/statistical proofs are presented- do not work.
When today i think about stuff like Hempel's or Goodman's Paradox, it still boggles the minds. Its too bad stuff like these arent taught at places where they virtually create gradutes in a assembly line with passable quantitative skills.

IG4U,
Agreed.
Nobody here is disputing that there is a relationship between economic growth and stock market performance. Infact we agree that economic growth would lead to stock markets doing well..but not vice-versa.
The only thing I've said is that stock market performance on its own is not a good indicator of an economy.
And yes, in the pure form, speculation exists even at BSE. Whats wrong with saying that?

Sameer

If you feel mathematical deception anywhere, please do show it.


Veman for the good of this forum, do not make this into a personal attack, be it directly or indirectly when you talk about passable quant skills please, i'll ignore such things.

Your swipe at Granger and all other methods of causality tests is also quite alarming, goodness, only a few pages devoted to them.

Too much philosophy for you

"Infact we agree that economic growth would lead to stock markets doing well..but not vice-versa"

Indirectly so that is true when you say economic growth leads to stock market grwth in the LR, i have again already posted that link 2 pages ago.

Monk

Sameer. Quit arguing with Vaman, he can't debate rationally without insulting you. He is also quite delusional, he is assuming statements which were never made.

Sameer

Since you mention paradoxes based on the concept of induction, you should know that there is such a thing as Bayes theorem and confidence intervals, again first your causality comments now induction...

Since you probably dont believe me, take it from wkpedia, if you dont believe them, no problem i can send you multiple private messages, not in this forum though, this is about the Indian economy.

"This principle is known as "Bayes' theorem". It is foundational to the mathematics of probability and statistics. When scientists publish analyses of experimental results and calculate that they are "statistically significant", they are implicitly using this principle. It could be argued that this principle is a better representation of how scientists actually reason than the original "principle of induction" described above.

Using this principle, the paradox does not arise. If you ask someone to select an apple at random and show it to you, then the probability of seeing a red apple is independent of the colors of ravens. The numerator will equal the denominator, the ratio will equal one, and the probability will remain unchanged. Seeing a red apple will not affect your belief about whether all ravens are black.

If you ask someone to select a non-black-thing at random, and they show you a red apple, then the numerator will exceed the denominator by an extremely small amount. Seeing the red apple will only slightly increase your belief that all ravens are black. You'll have to see almost every non-black-thing in the universe (and see they're all non-ravens) before your belief in "all ravens are black" increases appreciably. In both cases, the result agrees with intuition."
http://en.wikipedia.org/wiki/Hempel's_paradox


Again econometrics has evolved since the 60s and is an academically acceptable form of analysis used all around the world but you know how those "passable quant skills are"

andof course if you think that these authors have passable quant skills, what can i say

Abstract

One of the most enduring debates in economics is whether financial development causes economic growth or whether it is a consequence of increased economic activity. Little research into this question, however has used a true causality framework. This paper fills this lacuna by using Granger-causality tests to provide evidence of a positive and significant causal relationship going from stock market development to economic growth, particularly for less developed countries.
Download Info

http://ideas.repec.org/p/wpa/wuwpfi/0012006.html



This thread is about the Indian economy, let us leave induction out of this and move on now, if you wish to continue the endless debate, create another thread as this one is being hijacked with other unrlated topics and indirect swipes at members about things you dont seem to be updated about.

time for me to go to bed now.
thanks

Vaman

Please....

Yeah I am aware of "such a thing" as Bayes Theorem and statistical significance. Nothing new to me.
And yes, they have attempted to use probabilty to look for reasoning that would allow premise and conclusions to be independent. Bayes theorem is that attempt that doesnt succeed despite what hacks at wikipedia say. Simple reason : the set of non-black non-ravens is countably infinte. Therefore the set of ravens and non-ravens is not independent. Simple.. case closed.

While Probability is certainly useful in several contexts but not with the issues such as induction.
Why?
Because essentially it boils down to the assumption that a sample you choose is typical of the entire population. But then extending a sample characteristics (be it at 90%, 95% or 99% CI) to the population is induction itself.

.................................................. .........

The entire point of it was still this : That stock market performance in itself is not a good indicator of the economy.
Anyway..seems some of you are interested in stuff like this only when its going one-way. I'll leave you to plotting rho versus beta and calculating the regression coefficient.
Have fun!

Sameer

NOone ever said that the stock market by itself is a good indicator of the economy, but do go ahead after the personal insults, continue to put words in other peoples' mouths.


"Bayes theorem is that attempt that doesnt succeed despite what hacks at wikipedia say"

You think that only wikipedia says that want to bet, create another thread and I will show you. First you talk about causality, then when proven wrong, you move on to paradoxes and now Beyes is wrong, what next?
philosopher.


"There is an alternative to the "principle of induction" described above.

Let X represent an instance of theory T, and I represent all of our background information.

Let represent the probability of given . Then,

This principle is known as " (Click link for more info and facts about Bayes' theorem) Bayes' theorem". It is foundational to the mathematics of (A measure of how likely it is that some event will occur) probability and (A branch of applied mathematics concerned with the collection and interpretation of quantitative data and the use of probability theory to estimate population parameters) statistics. When scientists publish analyses of experimental results and calculate that they are " (Click link for more info and facts about statistically significant) statistically significant", they are implicitly using this principle.
It could be argued that this principle is a better representation of how scientists actually reason than the original "principle of induction" described above.

Using this principle, the paradox does not arise. If you ask someone to select an apple at random and show it to you, then the probability of seeing a red apple is independent of the colors of ravens. The numerator will equal the denominator, the ratio will equal one, and the probability will remain unchanged. Seeing a red apple will not affect your belief about whether all ravens are black.

If you ask someone to select a non-black-thing at random, and they show you a red apple, then the numerator will exceed the denominator by an extremely small amount.
Seeing the red apple will only slightly increase your belief that all ravens are black. You'll have to see almost every non-black-thing in the universe (and see they're all non-ravens) before your belief in "all ravens are black" increases appreciably. In both cases, the result agrees with intuition.

See also (Click link for more info and facts about Bayesian inference) Bayesian inference

References Hempel, C. G. A Purely Syntactical Definition of Confirmation. J. Symb. Logic 8, 122-143, 1943.
Hempel, C. G. Studies in Logic and Confirmation. Mind 54, 1-26, 1945.
Hempel, C. G. Studies in Logic and Confirmation. II. Mind 54, 97-121, 1945.
Hempel, C. G. Studies in the Logic of Confirmation. In Marguerite H. Foster and Michael L. Martin, eds. Probability, Confirmation, and Simplicity. New York: Odyssey Press, 1966. Pp 145-183
Falletta, Nicholas. The Paradoxicon: a Collection of Contradictory Challenges, Problematical Puzzles, and Impossible Illustrations. 1983. Pp 126-131. ISBN 0385179324
http://www.absoluteastronomy.com/enc...en_paradox.htm

but what d they know.
The sad part is that you seem to speak with such conviction on the matter, Beyes fails to proove the paradox? Mathematicans seem to disagree with you, i am sorry

What is your background anyway?again this is an Indian economics thread...., if you have problems with statistics and mathematics, you can take it up with your boss/ school institution for furthur reading.
In the meantime the rest of the world will use it.
I will leave it here.

bye bye


I would appreciate it if this thread could stick to Indian economics, if you feel a desire to debate Bayes you can create such a thread. Enough of this nonsense and personal attacks.

Sameer

India loses out on deteriorating terms of trade
VIDHIKA SEHGAL

TIMES NEWS NETWORK[ WEDNESDAY, OCTOBER 19, 2005 01:32:42 AM]
NRI Special Offer!
MUMBAI: Rising oil prices and increasing imports of raw materials have led to deteriorating terms of trade and an overall trading loss in the international market for India and China.

On the other hand, oil exporting countries such as Iran, Kuwait and Saudi Arabia have seen significant gains from trade as the price of their main export shot through the roof. Data from the Unctad Trade and Development report ’05 shows that from ’02-04, India has lost nearly 0.7% of its GDP from its deteriorating terms of trade, while China lost around 1.1% of its GDP. At the same time, Saudi Arabia and Kuwait have added 5.2% and 6.3%, respectively, to their GDP in the same period.

Terms of trade is the ratio of a country’s export price index to its import price index. It is said to be deteriorating if the ratio shows a downward trend since this means that the price of goods that a country imports has risen faster than the price of its exports. When this ratio falls below 100, the country begins to incur an overall loss while trading in the international market.

The Unctad data shows that India’s terms of trade index fell from 100 in ’02 to around 87 in ’04 (taking the base year as ’00). However, this is in sharp contrast to the DGCI&S data, which takes 1978-79 as the base and shows the net terms of trade to be well above 100 all these years.

However, after shifting the base to a more recent year like ’00-01, this data also reveals a deteriorating terms of trade on an average and a trading loss for India.

In effect, even though India’s exports have grown by 20-25% in the past couple of years, a growing trend of rising import prices, mainly because of oil, has wiped out any gains from trade that could have resulted from higher export volumes

The report also shows that developing nations can no longer be clubbed into one category. India and China have emerged as key exporters of manufactured goods, while others continue to export primary goods. In the past, the terms of trade debate has focused on developed countries on one side and developing nations on the other.

According to the UN’s statistics division, a gain or loss from changes in terms of trade is the difference between a country’s real GDP and real gross domestic income. During ’02-04, while exporters of manufactured goods, which include China and India, saw an average loss of 0.7% of their GDP because of trading losses, oil exporting countries gained as much as 3.2% of their GDP

http://economictimes.indiatimes.com/...15,curpg-2.cms

Sameer

India Inc optimism at zenith: D &B

Our Corporate Bureau / Mumbai October 20, 2005



Business confidence in India is higher than ever before if Dun & Bradstreet’s (D&B) latest Business Optimism Index (BOI) is anything to go by.

The quarterly index, which rates the optimism among Indian industries for the forthcoming quarter, stood at 187 for the fourth quarter of fiscal 2005, up 7.47 per cent from 174 the previous quarter. The index also registered a 73.4 per cent year-on-year increase from 108 per cent last year.

The index is compiled based on responses from 350 randomly selected companies from D&B’s commercial credit information file across six sectors – basic goods, capital goods, intermediate goods, consumer durables, consumer non-durables and the service sector.

Six parameters are considered when calculating the BOI – net sales, net profits, selling prices, new orders, inventories and employees.

For the upcoming quarter, the optimism index for volume of sales stood 92 per cent as against 84 per cent in the previous quarter, with 93 per cent of the respondents expecting an increase in the volume of sales. The optimism index for net profits stood at 92 per cent, up 6 per cent from the last quarter.

The optimism index for new orders stands at 91 per cent, with the service sector being most optimistic. The index for selling prices was up from 40 per cent last quarter to 42 per cent, with the basic goods segment leading.

The optimism index for inventory levels, too, was up from 47 per cent to 50 per cent this quarter and the index for employees went up from 46 per cent to 58 per cent for the upcoming quarter.
http://www.businessstandard.com/comm...dx=1&lselect=0