Application of multi-criteria decision analysis for investment strategies in the Indian equity market

Since March 2002, The Motley Fool’s founders, David Gardner and Tom Gardner, have published monthly stock recommendations under Motley Fool’s premium Stock Advisor service. In this paper, the authors investigate whether analysts’ recommendations can add value for investors by examining the performance of portfolios constructed based on Motley Fool’s recommendations. They evaluate the announcement effect on share price corresponding to the publication of stock recommendations. Additionally, the researchers examine holding period returns for a portfolio imitating the actions of Stock Advisor. They find portfolios composed of recommendations through Stock Advisor added value initially upon recommendation and across extended holding periods. Additionally, the authors find that the Stock Advisor sample outperforms other sample portfolios on a risk-adjusted basis and over several subperiods. The findings contribute to the literature on the usefulness of analysts’ recommendations in adding value to investors’ portfolios.

The recent India-China geopolitical conflicts have presented enormous uncertainty to the investors in various sectoral indices of the Indian stock market. This empirical study aims to examine the impact of intensified India-China geopolitical conflicts 2020 on investors’ herding behavior in the National Stock Exchange sectoral indices. The high-frequency data of three major NIFTY sectoral indices (Auto, Energy, and Pharma) are used in an intensified geopolitical event window to spot precisely the traces of the investors’ herding behavior. Furthermore, multifractal detrended fluctuation analysis (MFDFA) is employed to obtain Hurst Exponent values (h(q)) for the NIFTY sectoral indices. The findings reveal that these NIFTY sectoral indices exhibited profound traces of herding behavior on the event day (t = 0) due to the heightened India-China geopolitical clashes. In addition, these indices depicted an overall higher level herding behavior with the (h(q)) values close to 0.72 throughout the intensified geopolitical event window. The study concludes that the sectors highly reliant on the Chinese supplies and with significant trade linkages with China depicted a higher level of herding behavior in their indices. Further, the presence of herding behavior in these sectoral indices is due to the operational and supply-chain risks posed by the geopolitical event.

Acknowledgments
The authors express their sincere thanks of gratitude to Dr. Bikramaditya Ghosh (Associate Professor, Symbiosis Institute of Business and Management, Bangalore, India) and Dr. Iqbal Thonse Hawaldar (Professor, College of Business Administration, Kingdom University, Riffa, Bahrain) for their instrumental role in encouraging and motivating them to accomplish this publication. The authors also extend their sincere thanks to Dr. Manu K.S and Dr. Surekha Nayak (Assistant Professor, School of Business and Management, CHRIST (Deemed to be university), Bangalore, India) for their continued support throughout this empirical investigation.