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Empirical Evidence from Unit Root Test for Weak Form Market Efficiency: Special Reference to Broad Based Indian Stock Market Indices

XIBA Business Review

Volume 3 Issue 1 & 2

Published: 2017
Author(s) Name: N. Venkatesh Kumar, M. Ganesh Babu | Author(s) Affiliation: Research Scholar, Dept. of Mgt., Rajagiri Dawood Batcha College of Arts & Scie., Tamil Nadu, India.
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Abstract

Examination of market efficiency especially in the context of developing markets plays a paramount role in order to structure informed investment decision and facilitates the existing and prospective investors to construct a well-diversified portfolio. This paper examines the presence of weak-form of market efficiency attributing to the random walk model in Indian Stock Market by considering the broad based market indices such as National Stock Exchanges’ NIFTY, NIFTY 500 and Bombay Stock Exchanges’ SENSEX, BSE 100, BSE 200 and BSE 500 for the period between 2000 and 2016 (17 years). During the study period, selected indices’ daily returns have shown non-normality, homogeneity of mean and variance. Runs test for randomness, Auto-Correlation Function (ACF) and Augmented Dickey-Fuller (ADF) Unit root test have indicated statistically significant results and accentuates that the selected broad based market indices remained weak-form inefficient during the study period.

Keywords: Indian Stock Market, Investment Decisions, Efficient Market, Randomness, Unit Root

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