Testing Weak Form Market Efficiency of Indian Stock Markets (original) (raw)

Testing the Weak Form Efficiency of Indian Stock Market with Special Reference to NSE

This study examines the random walk hypothesis to determine the validity of weak-form efficiency of the second major stock markets in India, NSE. The study uses daily observation over the span from 3rd July 2007 to 31st December 2011, comprising a total of 1116 observations. The random walk hypothesis is examined using auto correlation function, unit root tests (Augmented Dickey-Fuller test) and the runs test. The ADF and unit root tests clearly reveal that the null hypothesis of unit root is convincingly rejected in the case of stock market returns of indices, viz. S&P CNX NIFTY and the industry indexes. This suggests that the Indian stock markets do not show characteristics of random walk and as such are not efficient in the weak form implying that stock prices remain predictable. The ACF and Unit root test do not show characteristics of random walk and as such are not efficient in the weak form for only some industries indexes such as the banking industry. This implies that the Indian stock markets are not weak form efficient signifying that there is systematic way to exploit trading opportunities and acquire excess profits. This provides an opportunity to the traders for predicting the future prices and earning abnormal profits on the banking industry. The implication of rejection of weak form efficiency for investors is that they can better predict the stock price movements by holding a well-diversified portfolio while investing in the Indian stock markets.

The weak-form efficiency of the Indian stock market: Fresh Evidence

Zenodo (CERN European Organization for Nuclear Research), 2023

The weak-form efficiency of the Indian stock market: Fresh Evidence Numerous types of research have been done ever since the efficient market hypothesis notion was created to support or, in some cases, refute the theory. It is practically hard to predict future prices and turn a profit from them when it is clear that prices do, move randomly or drunkenly. On the other hand, if the outcome is the opposite of what was said above, there is a potential to profit simply by looking at a security price's historical behaviour. Because of this, economists and the general investing community are particularly interested in this topic. 901 T he primary goal of the present research initiative is to determine if the Indian stock market follows a random walk or not. The data on eight nifty sectoral indices' daily opening, closing, high and low values are taken from a website. The Augmented Dickey-Fuller test and the Phillips-Perron test is used to assessing the stationarity of the selected eight sectoral indices. The Variance ratio test is used to check for auto-correlation between the returns and the Runs test is performed to examine if the stock market followed a random walk or not. The unit root tests show that the returns from the eight selected sectoral indices are integrated into order 1. According to the variance ratio test future stock prices can be forecasted by prior stock prices in the Indian stock market. The Runs test results indicate the returns are not random throughout the studied time frame.

Weak Form Efficiency In Indian Stock Markets

2007

Hypothesis of Market Efficiency is an important concept for the investors who wish to hold internationally diversified portfolios. With increased movement of investments across international boundaries owing to the integration of world economies, the understanding of efficiency of the emerging markets is also gaining greater importance. In this paper we test the weak form efficiency in the framework of random walk hypothesis for the two major equity markets in India for the period 1991 to 2006. The evidence suggests that the series do not follow random walk model and there is an evidence of autocorrelation in both markets rejecting the weak form efficiency hypothesis.

Predicting the Stock Market Efficiency in Weak Form: A Study on Dhaka Stock Exchange

International Journal of Economics and Financial Issues, 2018

This study aims to examine the weak form efficiency of Dhaka Stock Exchange (DSE) using random walk model of EMH based on daily return series. The study applies both non-parametric [Kolmogorov-Smirnov test with Lilliefors coefficient, run test] and parametric test [autocorrelation test, unit root test and variance ratio test] on DSE general index, DSE broad index and DSE30 index ranging from June 1, 2004, to March 18, 2018. The results of the tests reject the null hypothesis of randomness. On the other hand, the result of the run test shows that share prices of DSE30 index follow the random walk. The return series of DSE broad index show some signs in favour of randomness by autocorrelation test while the returns of DSE general index support the efficiency concerning variance ratio test under both homoscedastic and heteroskedastic assumptions. The overall results of the study show inefficiency of DSE in the weak form which means the investor has a chance to make an abnormal profit p...

Evidence for Weak Form Efficiency in Stock Markets: The Case of Colombo Stock Exchange

SSRN Electronic Journal, 2000

With increased movement of investments across international boundaries owing to the integration of world economies, the understanding of efficiency of the emerging markets is also gaining greater importance. This paper investigates the weak form efficiency of the Colombo Stock Exchange by analyzing returns on the two key indices of the exchange which are the All Share Price Index and the Milanka Price Index over a long term period commencing from the year 1985 upto the year 2009. Weak form efficiency is tested subjecting both the indices using returns both on a daily as well as a monthly basis testing the random walk hypothesis using four techniques of Autocorrelation and the use of a non-parametric test which is the runs test. Results of these tests prove that based on the daily returns that the market is weak form inefficient. When considering the monthly returns the runs test states that the market is efficient while Q statistic gives mixed results. The other tests are in line with the daily returns. The paper also considers anomalous behaviour in the Colombo Stock Exchange, with the intention of possibly identifying a day-of-the-week effect or a month-of-the-year-effect.

Testing Weak-Form Market Efficiency of Dhaka Stock Exchange

Measuring the efficiency of the stock market is an important research topic as there are various implications for investors. This paper investigates the weak form efficiency in the framework of the random walk hypothesis for the stock market in Bangladesh, employing both Non Parametric tests (Runs test and Phillips-Perron test) and Parametric tests (Autocorrelation test, Augmented Dickey-fuller test, and Variance Ratio test). The study uses daily return data for the three stock indices of Dhaka Stock Exchange such as DSI (

Testing weak form efficiency in the indian capital market

2011

Market Efficiency Hypothesis is an important notion for investors who wish to hold internationally diversified portfolios. If markets were not efficient task of constructing an internationally diversified portfolio for an investor will be an onerous task. With the increased movement of investments into emerging markets, greater importance is being given to the understanding of the market efficiency in emerging markets. In this paper we test the weak form efficiency or random walk hypothesis for the two major equity markets (BSE and NSE) in India for the period 1997 to 2011. Results of market efficiency are mixed as: for quarterly data, all three methods ADF, PP and KPSS tests support the weak form efficiency for later sample period 2007 to 2011, but slight conflict for earlier period 1997 to 2007 as only PP test shows weak form inefficiency; for monthly data, all three test method are consistent on the weak form efficiency for the period 2007 to 2011 and not efficient for earlier period 1997-2007. For daily and weekly data, all three test methods reject weak form efficiency during all sample periods.

Weak Form Market Efficiency of Indian Stock Market: Evidence from Indian Metal & Mining Sector

Pacific Business Review (International), 2021

Indian Capital Market is one of the fastest growing markets among developing countries in terms of participation, technology, investment strategies and trade volume. It witnessedincreased individual investors in the last few years. Individual small investors invest their excess money (saving) into listed companies' shares to earn profit and at the same time, it helps listed corporates to raise funds for longer period by selling their shares. For selecting right stock, investors use various techniques to reduce the risk and maximize profit. The market is called efficient when all the currently available private, public and historical information is reflected fully by the share price in the market and market is weak form efficient, when current market price of share is reflected by the historical price, this mean investors can't earn abnormal profit with the use of historical data. Present study test weak form of market efficiency of the selected metal & mining companies of India on daily, weekly and monthly basis from 1st April 2017 to 31st March 2019 using Run test and Z-value.The overall results reveal that the Indian Metal & Mining companies' daily, weekly and monthly returns are moving randomly, indicating that the past share prices of the companies are not affecting the future one and supports the Weak Form of Market Efficiency or Random Walk Theory.