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The Testing of Efficient Market Hypotheses: A Study of Indian Pharmaceutical Industry

Author

Listed:
  • Abhay Kumar

    (MPSTME-NMIMS University, Mumbai India,)

  • Rashmi Soni

    (KJ Somaiya Institute of Management - Somaiya Vidyavihar University, Mumbai India)

  • Iqbal Thonse Hawaldar

    (Department of Accounting and Finance, College of Business Administration, Kingdom University, Bahrain.)

  • Meghna Vyas

    (Final Year Student (MBA Tech), NMIMS University, Mumbai, India.)

  • Vaibhav Yadav

    (Final Year Student (MBA Tech), NMIMS University, Mumbai, India.)

Abstract

The purpose of this study is to test whether the Indian pharmaceutical companies support efficient market hypotheses (EMH) and examine the efficiency of the Indian stock market in three forms, i.e., the weak, the semi-strong, and the strong form of market efficiency. For testing the weak form of efficiency, researchers collected stock price data of 10 listed pharmaceutical companies for the past six years, from 2012 to 2017 from the NSE website, and conducted a run test. To test the efficiency of semi-strong form, researchers collected data on the announcement of events like buyback, stock split, rights issue, dividend, bonus issue. They conducted an event study on the data. For testing the strong form of efficiency, researchers collected data consisting of NAV of some mutual funds (pharmaceutical funds) and the returns of a benchmarking index to compare. The study concludes that the pharmaceutical companies and Indian stock market is efficient in the weak form of EMH and not efficient in the semi-strong and strong form of EMH.

Suggested Citation

  • Abhay Kumar & Rashmi Soni & Iqbal Thonse Hawaldar & Meghna Vyas & Vaibhav Yadav, 2020. "The Testing of Efficient Market Hypotheses: A Study of Indian Pharmaceutical Industry," International Journal of Economics and Financial Issues, Econjournals, vol. 10(3), pages 208-216.
    • Handle: RePEc:eco:journ1:2020-03-25
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    References listed on IDEAS

    as
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    3. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
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    6. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    7. Asim Mishra, 2005. "An Empirical Analasis of Market reaction Around the Bonus Issues in India," Finance 0505025, University Library of Munich, Germany.
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    Cited by:

    1. K. Abhaya Kumar & Prakash Pinto & Iqbal Thonse Hawaldar & K. G. Ramesh, 2021. "Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 523-537.
    2. Bharat Kumar Meher & Iqbal Thonse Hawaldar & Mathew Thomas Gil & Deebom Zorle Dum, 2021. "Measuring Leverage Effect of Covid 19 on Stock Price Volatility of Energy Companies Using High Frequency Data," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 489-502.
    3. K. Abhaya Kumar & Prakash Pinto & Iqbal Thonse Hawaldar & Saheem Shaikh & Shravan Bhagav & B. Padmanabha, 2022. "Investigating the Nexus between Crude Oil Price and Stock Prices of Oil Exploration Companies," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 40-47, July.

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    More about this item

    Keywords

    Stock market efficiency; Buyback; Stock split; Rights issue; Dividend announcement; Bonus; Mutual funds; Benchmarking index.;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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