The Indian secondary market is normally faced with volatile returns with the result that the returns vary every day and also the market possesses some amount of risk. The following table presents the stock market indices at BSE and NSE during the month of September 2010. There are some other indices, but the table shows only two major indices.
As far as return is concerned, it is the difference between the logarithm of the closing index of day t + 1 and day t. The risk can be found out in terms of variances/standard deviation.
1. Find out the average return during the month at both the exchanges.
2. Show which market has greater risk in terms of variations in the indices.
3. Are the indices in the two markets correlated?
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