Empirical Study of the Weak Form of EMH on Indian Stock Market
نویسندگان
چکیده
Efficiency of stock markets is an essential characteristic to provide fair investment opportunities to all class of investors. It suggests that no investor shall be able to make abnormal gains using any information or by way of analysis. An understanding about the level of efficiency explores avenues for unnatural profits from the stock market. Efficient markets tend to immediately reflect all the information in the value of stocks. Weakly efficient markets showcase randomness in movement of prices. Efficient markets have been an area of study of several economists, academicians, research scholars, corporate houses and many more. However, both BSE and NSE are reliable and can be considered to check the efficiency of Indian stock markets. But, BSE SENSEX being an older index facilitates better availability of data and a comparison of efficiency over the past two decades. The study aims to test the randomness of Indian stock market using BSE SENSEX as a base index representing the Indian stock market and comment on its weak form of efficiency. The study uses both non parametric (Runs test) and parametric test (Autocorrelation, Dickey Fuller Test) to test the weak form of efficiency. The Indian stock markets provided varying results against the tests applied to the index values. The results of autocorrelation suggest a high degree of correlation between values suggesting non randomness in Index values. But, Runs test and Dickey Fuller test support the random walk hypothesis for Indian stock market. Considering Dickey Fuller test as a better tool to assess the randomness in values, the results of the study are in support of random walk of Indian stock market suggesting the existence of weak form of efficiency in the market.
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