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Empirical Evidence On Weak Form Efficiency in Indian Stock Market

International Journal of Financial Management

Volume 2 Issue 3

Published: 2012
Author(s) Name: Amit Kumar Mishra, Vandna Misra and Sanjay Rastogi | Author(s) Affiliation:
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Abstract

Realizing the significance of stock market efficiency in the wake of global financial crisis and the limitations of existing literature, this study is intended to test weak form efficiency of Indian stock market so as to assess the efficiency of Indian stock market and suggest necessary measures to improve it. For the purpose of study, National Stock Exchange, the biggest player and a model stock exchange of Indian stock market has been selected. To test weak form efficiency, the most commonly used parametric as well as nonparametric tests have been applied. Runs test is used to check randomness, auto correlation test is used to examine independence and Ljung-Box (LB) statistics is used to test significance of independence in return series. The results of study offer supportive evidence for partial rejection of weak form efficiency in Indian stock market by endorsing absence of randomness and independence in noticeable number of return series. It reveals drifts in market efficiency which offers avenues to market participants for devising profitable trading strategies. The study also stresses on improving efficiency of Indian stock market by taking necessary measures to further strengthen economic development.

Keywords: Efficient Market Hypothesis, Random Walk Theory, Weak Form of Efficiency, Stock Market, Stock Market Efficiency

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