Testing Weak Form Efficiency for Indian Stock Markets

Economic and Political Weekly, Vol. 41, No. 1, pp. 49-56, January 2006

Posted: 1 Nov 2010

See all articles by Khan Masood Ahmad

Khan Masood Ahmad

Jamia Millia Islamia (A Central University)

Shahid Ashraf

Jamia Millia Islamia (A Central University)

Shahid Ahmed

Jamia Millia Islamia (A Central University) - Economics

Date Written: 2006

Abstract

This paper attempts to seek evidence for the weak form efficient market hypothesis using the daily data for stock indices of the National Stock Exchange, Nifty, and the Bombay Stock Exchange, Sensex, for the period of 1999-2004. The random walk hypothesis for the Nifty and the Sensex stock indices is rejected. Both the stock markets have become relatively more inefficient in the recent periods, and have high and increasing volatility. Non-parametric tests also indicate that the distribution of the underlying variables are not normal and the deviation from normality has become higher in recent years. Both the indices show a negative autocorrelation at lag 2, indicating over-reaction one day after information arrival, followed by a correction on the next day. The study suggests immediate dissemination of information on foreign institutional investor trades and equity holding and the need to improve free float of equity to move towards efficiency.

Suggested Citation

Ahmad, Khan Masood and Ashraf, Shahid and Ahmed, Shahid, Testing Weak Form Efficiency for Indian Stock Markets (2006). Economic and Political Weekly, Vol. 41, No. 1, pp. 49-56, January 2006. Available at SSRN: https://ssrn.com/abstract=1701155

Khan Masood Ahmad

Jamia Millia Islamia (A Central University)

Jamia Nagar, New Delhi
Delhi, Delhi 110025
India

Shahid Ashraf

Jamia Millia Islamia (A Central University) ( email )

Jamia Nagar, New Delhi
Delhi, Delhi 110025
India

Shahid Ahmed (Contact Author)

Jamia Millia Islamia (A Central University) - Economics ( email )

Jamia Nagar
New Delhi, 110025
India

HOME PAGE: http://jmi.ac.in/economics/faculty-members/Prof_Shahid_Ahmed-1783

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