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A study on weak form of market efficiency during the period of global financial crisis in the form of random walk on Indian capital market

Author

Listed:
  • Priyanka Jain
  • Vishal Vyas
  • Ankur Roy

Abstract

Purpose - This paper aims to study the weak form of efficiency of Indian capital market during the period of global financial crisis in the form of random walk. Design/methodology/approach - The study considered daily closing prices of S&P CNX Nifty, BSE, CNX100, S&P CNX 500 from April 1, 2005 to March 31, 2010. The data source is the equity market segment of NSE and BSE. Both parametric and nonparametric tests (“ex‐posts” in nature) are applied for the purpose of testing weak‐form efficiency. The parametric tests include Augmented Dickey‐Fuller (ADF) unit root tests and nonparametric tests include Phillips‐Perron (PP) unit root tests and Run test. ADF tests use a parametric autoregressive structure to capture serial correlation and PP tests use non‐parametric corrections based on estimates of the long‐run variance of ΔYt. Findings - The results suggested that the Indian stock market was efficient in its weak form during the period of recession. It means that investors should not be able to consistently earn abnormal gains by analysing the historical prices. Hence one should not be able to make a profit from using something that everybody else knows. Practical implications - The study reports that all the stocks in these selected indices are fundamentally strong and their prices are not influenced largely by historical prices and other relevant factors which came from industry and any other information that is publically available. Thus it can be concluded that the Indian stock market was informationally efficient and no investor can usurp any privileged information to make abnormal profits. Originality/value - Where past studies have examined the weak‐form of efficiency of various markets and the effect of globalisation and global financial crisis on the various sectors of developing and emerging economies, this paper attempts to study the weak form of efficiency of the Indian capital market in the period of recession in the form of random walk.

Suggested Citation

  • Priyanka Jain & Vishal Vyas & Ankur Roy, 2013. "A study on weak form of market efficiency during the period of global financial crisis in the form of random walk on Indian capital market," Journal of Advances in Management Research, Emerald Group Publishing Limited, vol. 10(1), pages 122-138, May.
    • Handle: RePEc:eme:jamrpp:v:10:y:2013:i:1:p:122-138
    DOI: 10.1108/09727981311327802
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    Citations

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    Cited by:

    1. Mai Ahmed Abdelzaher, 2021. "Study the Efficiency Hypothesis in the Egyptian Stock Market," International Journal of Economics and Financial Issues, Econjournals, vol. 11(1), pages 18-25.
    2. Cheng-Wen Lee & Taufiqquddin Ande, 2022. "Pharmaceutical and Telecommunications Sector Weak Form Market Efficiency Study in Indonesian Capital Market 2017-2020," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 12(6), pages 1-9.
    3. Harshita & Shveta Singh & Surendra S. Yadav, 2018. "Changing Nature of the Value Premium in the Indian Stock Market," Vision, , vol. 22(2), pages 135-143, June.
    4. Narayan Parab & Ramashanti Naik & Y. V. Reddy, 2020. "The Impact of Economic Events on Stock Market Returns: Evidence from India," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(11), pages 1232-1247, November.

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