An Empirical Study on Forecasting Stock Returns of Tata Consultancy Services

Abstract

Forecasting of stock returns is always a vitally important financial notion confronted by investors. Due to existing fluctuations in the stock returns, investors are always keen to show their interest as they want to take the advantage of potential returns from the organization by way of investing in stocks. Hence, it becomes a matter of concern for investors to predict future stock returns so that they can attain their objective of wealth maximization. This reason creates an urge to explore the forecasting of stock returns empirically. This paper employed the ARIMA model, developed by Box and Jenkins in 1970, which relies on the previous values of the variable itself. In the paper, this methodology is applied to the stock returns of one of the top IT companies listed on NSE i.e. Tata Consultancy Services Ltd. Data of daily returns were collected from 1 April 2008 to 31st March 2021. Results concluded that the ARIMA model had a strong capability of forecasting in the short run.