Impact of Sample Size on the Distribution of Stock Returns - an Investigation of Nifty & Sensex

Abstract

The purpose of the study is to test the impact of the sample size on the distributional characteristic of the stock returns of Nifty & Sensex. Many statistical tools used by the financial analyst and academician for their analysis and research carried out under the assumption that stock returns are normally distributed for all kinds of sample size. Failure of the underlying assumption of normality can mislead the inferences. The study shows that sample size can distort the normality assumption of the stock returns. Based on statistical analysis and normality test, namely, Kolmogorov Smirnov (K-S), Anderson Darling (A-D), Jarque-Bera (J-B) results show that large sample size daily stock returns does not follow the normal distribution while small sample size monthly stock returns follow the normal distribution.