Open Access
Subscription Access
Testing Market Efficiency of Indian Capital Market
The paper is an empirical study on Indian capital market for the period 1st January, 2010 to 31st December, 2015. The random walk hypothesis is tested to see the behavior of stock prices. While there are three forms of Market efficiency namely weak, semi strong and the strong, market efficiency of weak form is tested here by applying the Runs test and Auto-correlation test. The random walk hypothesis proves the market efficiency of the Indian market. The Runs test shows the daily return on nifty index does not move in a random manner. The results of the test raise the question mark on the efficiency of the market. Auto-correlation test suggest that there is no serial correlation in the nifty index data which supports the market efficiency in the Indian capital market.
Keywords
Market Efficiency, Runs Test, Auto-Correlation, Random Walk Hypothesis, Unit Root, Augmented Dickey Fuller Test.
User
Font Size
Information
- Ahmad, K M; Ashraf, S and Ahmed, S. (2006). Testing Weak Form Efficiency for Indian Stocks Market, Economic and Political Weekly, Jan., 39-46
- Barua, S K (1981). The short-Run Price Behaviour of Securities – Some Evidences on Efficiency of Indian Capital Market, Vikalpa, Vol. 6, No. 2
- Campbell, J. Y., A. W. Lo and A. C. MacKinlay (1997).The Econometrics of Financial Markets Princeton University Press, New Jersey.
- Dickey D A and Fuller W A (1979). Distribution of the Estimators for Aut oregressive Time Series with a Unit Root, Journal of the American Statistical Association, Vol. 74, No. 366.
- Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 25.
- Fama, E. F. (1998). Market Efficiency, Long-Term Returns, and Behavioral Finance. Journal of Financial Economics, 49(3).
- Fama, E. F., & French, K. R. (1992). The Cross-Section of Expected Stock Returns. Journal of Finance, 47 (2).
- Gupta, O P, (1985). Behaviour of Share Prices in India – A Test of Market Efficiency. National Publishing House, Delhi
- Haugen, Robert A. and Josef Lakonishok (1988). The Incredible January Effect, Homewood: Dow JonesIrwin.
- Jensen, Michael. (1968). The performance of Mutual Funds in the period 1945-1964. Journal of Finance, May,23
- Lo, Andrew W. and A. Craig MacKinlay, (1999). A NonRandom Walk down Wall Street. Princeton University Press.
- Malkiel, B. G. (1995). Returns from Investing in Equity Mutual Funds 1971 to 1991. Journal of Finance, June, 50:2.
- Malkiel, B. G. (2003). The Efficient Market Hypothesis and Its Critics. Journal of Economic Perspectives, 17(1).
- Samuelson, P. A., (1965). Proof that properly anticipated prices fluctuate randomly. Industrial Management Review, 6.
- Shiller, Robert J (2000). Irrational Exuberance. Princeton University Press.
- Wojcik, D., Kreston, N., & Mcgill, S. (2013). Freshwater, saltwater and deepwater: Efficient Market Hypothesis Versus Behavioural Finance. Journal of Economic Geography, 13 (2).
Abstract Views: 637
PDF Views: 155