I use the term ‘consensus’ in context of stock markets across the world here. The dictionary meaning of Consensus is: ‘An opinion or position reached by a group as a whole’ or ‘a general agreement or accord’, mostly used in political context.
This morning when I was surfing across the major stock indices across the world for their level of heights (I repeat heights!!!) they achieve nowadays, I just came across this issue. Consensus can be a phenomenon not only among politician in particular and human being in general, but also among the stock indices. Check the stats given in the below picture:
You can see that almost all indices are moving in consensus; at a decline of about (-) 1.20%+ something!! Though it is obvious that Indian indices have always been following the US indices and also other major global indices, but can we say that indian market almost imitate global markets, NASDAQ and NIKKEI in this case? It seems that market efficiency is at its peak. Okay, you might be wondering if stock markets are following the Efficient Market Hypothesis (EMH), isn’t it? (Drumbeats please!!! ;-))
As you watch throughout the day, most of the stock indices seem to act in unison. In case of Indian stock market where two major indices namely BSE Sensex and NSE S&P Nifty50 are more or less moving in unison. It seems awfully odd that investors around the country are all making independent decisions to buy or sell at the exact same time in sufficient quantities to cause a price movement in both indices at EXACTLY the same moment in time. But is this valid for cross-border scenario also?
Is this market manipulation? If not, what “magic event” occurs that causes all indexes to change direction at the same time? This seems to be a good issue to start with for may finance researchers (including me!! He..he..he..!!).