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International
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International Journal of Economic and Business Management Vol. 3(2), pp. 6-12, March, 2015. ISSN: 2384-6151 DOI: 10.14662/IJARER2015.002
Full Length Research
The Indian Stock Market – is it a Random Walk?
Prof. Davinder Suri
Faculty – Economics, IBS Mumbai, Hiranandani Gardens Powai, Mumbai, India. E-mail: davinders@ibsindia.org
Accepted 16 March 2015
Efficiency in
stock markets has been the subject of study in developed and developing
financial markets globally in recent times. Liberalization of financial
markets in developing economies has made them attractive to the
international investors wherein the structural reforms and increased
liquidity have a bearing on efficiency. Stock market efficiency suggests
that stock prices factor in all relevant information when that
information is readily available and widely circulated, which implies
that there is no systematic way to exploit trading opportunities and
gain excess profits. Studies conducted on the stock exchanges in the
developed markets have found them to be efficient in terms of valuation
of stock prices and hence earning returns from undervalued stocks
becomes difficult and this is important to the investors who wish to
hold internationally diversified portfolios. The Indian markets have
become most sought-after around the globe by the international investing
community. Research conducted on the Indian stock markets panning the
1990s to now suggests inefficiency in the Indian bourses shows that
there is an opportunity to earn more than fair returns. In this paper we
test the weak form efficiency in the framework of random walk hypothesis
for the National Stock exchange in India for the period March 2003 to
February 2015. The tests conducted include tests for stationarity and
normality. The test results of the data series of NSE S & P 500 Index
series and daily returns from the index show that the NSE mostly follows
a random walk. Cite This Article As: Suri D (2015). The Indian Stock Market – is it a Random Walk?. Inter. J. Econ. Bus. Manage. 3(2): 6-12.
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