The weak-form efficiency of the Indian stock market: Fresh Evidence (original) (raw)
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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.
Testing Weak Form Market Efficiency of Indian Stock Markets
"This paper examines the weak-form market efficiency of Indian stock markets namely Bombay Stock Exchange and National Stock Exchange for the period August 1998 to July 2010. The data is also divided into intervals of three years, to find out the weak form efficiency over periods. Daily returns are examined for random walks using Unit Root Test, Auto correlation and runs tests. From the Unit Root, It has been found that data is stationary. From the analysis of whole period, it is found that Autocorrelation prevails in the market. But in the Interval of three year data, significant Autocorrelation is found only in the period August 2001 to July 2004. But thereafter, market became random walk because no significant autocorrelation found after 2004. Runs Test conclude that the whole period null hypothesis of random walk was not accepted. In all months, null hypothesis is accepted of random walk except January month. But in all days random walk is prevailing. The period of 2004 to 2010 support weak form Market Efficiency."
Journal of Economics, Finance and Administrative Science, 2022
PurposeDespite volumes of research on the efficient market hypothesis (EMH) over the last six decades, the results are inconclusive as some studies supported the hypothesis, and some studies rejected it. The study aims to examine the market efficiency of the Indian stock market.Design/methodology/approachFor analysis, nine Bombay Stock Exchange (BSE) broad market indices were selected covering the study period from 01 January 2011 to 31 December 2020. The data collected for this study are daily open, high, low and closing prices of selected indices. The tools used in this study are: (1) unit root test to check the stationarity of time series, (2) descriptive statistics, (3) autocorrelation and (4) runs test.FindingsThe empirical findings of the study reveal that BSE broad market indices do not follow a random walk and Indian stock market is as weak-form inefficient.Research limitations/implicationsThe findings from this study provide several avenues for future research. One of the r...
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.
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.
Is the Indian Stock Market efficient - A comprehensive study of Bombay Stock Exchange Indices
arXiv: Statistical Finance, 2015
How an investor invests in the market is largely influenced by the market efficiency because if a market is efficient, it is extremely difficult to make excessive returns because in an efficient market there will be no undervalued securities i.e. securities whose value is less than its assumed intrinsic value, which offer returns that are higher than the deserved expected returns, given their risk. However, there is a possibility of making excessive returns if the market is not efficient. This article analyses the five popular stock indices of BSE. This would not only test the efficiency of the Indian Stock Market but also test the random walk nature of the stock market. The study undertaken in this paper has provided strong evidence in favor of the inefficient form of the Indian Stock Market. The series of stock indices in the Indian Stock Market are found to be biased random time series and the random walk model can't be applied in the Indian Stock Market. This study confirms ...
Is the Configuration of Indian Stock Market Weakly Efficient?
ComFin Research, 2021
The main aim of this study is to find out the whether the Indian stock market efficiency is in weak form. The aim of this study is to look into the Indian Stock Market’s lack of market performance. From 2000 to 2015, sample is gathered on a daily, weekly, and monthly basis. Unit Root Test, Run Test, and KS Test are used to examine the data. According to the findings, The Runs Test disproves the existence of a random walk and demonstrates that the Indian stock market is not weakly efficient. Through stock valuation strategies, technical and fundamental analysts may generate volatile returns.
Efficiency Hypothesis of the Stock Markets: A Case of Indian Securities
The paper attempts to investigate the validity of the Efficient Market Hypothesis on the Indian Securities Market. Initially, the paper discusses the definitions and types of the EMH, as also the literature available on the same. Taking a sample of eleven securities listed on the Bombay Stock Exchange (BSE), the oldest stock exchange of Asia, we apply the runs tests and the autocorrelation tests in order to judge the efficiency of the Stock Markets. The Autocorrelation test when directly applied to share prices gives conflicting results with Runs test and thus, making it difficult to reach a definite conclusion. Then, the autocorrelation test is applied to first differenced series, which gives satisfactory results. In a nutshell, it is observed that the effect of stock prices for the sample companies on future prices is very meager and an investor cannot reap profits by using the share price data as the current share prices already reflect the effect of past share prices.