Efficient Market Hypothesis: A Study on Indian Capital Market

Authors

  • Subir Sen
  • B. M. Singh
  • Sourav Mazumder

DOI:

https://doi.org/10.33516/rb.v42i4.69-79p

Keywords:

Stock Market, Market Efficiency, Valuation, Event Studies, Insider Trading.

Abstract

An important question among stock market investors worldwide is whether the market is efficient enough. Market efficiency bears far more deeper implications than most investor's imagine; about the ability of investor's to outperform the market. Efficiency of stock market implies whether it reflects all information available to the market participants at any given point of time. The Efficient Market Hypothesis (EMH) maintains that all stocks are perfectly priced or valued according to their inherent investment attributes, the knowledge of which all market participants possess equally (Fama, 1988). The paper tested the EMH in context of Indian stock market in the post liberalization era (1991-2013) through a series of tests. During this period several measures were initiated by the GoI to liberalize the functioning of the stock market and bring in more transparency. However, the outcomes of the research suggest that despite substantial progress in this regard the Indian stock market, in terms of EMH still remains weak. Therefore, there remains a distinct possibility by investor's in Indian stock markets to generate super-normal returns.

Downloads

Download data is not yet available.

Downloads

Published

2017-01-01

How to Cite

Sen, S., Singh, B. M., & Mazumder, S. (2017). Efficient Market Hypothesis: A Study on Indian Capital Market. Research Bulletin, 42(4), 69–79. https://doi.org/10.33516/rb.v42i4.69-79p

Issue

Volume 42, Issue 4, January 2017

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC

References

Barua, S.K, 1981, The Short-Run Price Behavior of Securities: Some Evidence on

Efficiency of Indian Capital Market, Vikalpa, April, Vol.6,No.2, pp.93-100.

Barua, S.K. and V. Raghunathan, 1987, Inefficiency and Speculation in the Indian Capital Market, Vikalpa, JulySeptember, Vol.12, No.2, pp.53-58.

Barua. S.K and V. Raghunathan. 1990, Soaring Stock Prices: Defying Fundamentals. Economic and Political Weekly, November17, Vol.25, No.46: pp.2559-61.

Davies, Peter Lloyd, and Canes, Michael. "Stock Prices and the Publication of Second-Hand Information," Journal of Business, 51, No.1 (Jan. 1978), pp. 43-56.

Dodd, Peter, and Ruback, Richard. "Tender Offers and Stockholders' Returns,"

Journal of Financial Economics 5, No 3 (Dec. 1977), pp. 351-375.

Elton, Edwin J., Gruber, Martin J., Das, Sanjiv, and Hklarka, Ma. "Efficiency with Costly Information: A Reinterpretation of Evidence from Managed Portfolios, "Unpublished Manuscript, New York University, 1990.

Fama, E (1970) “Efficient Capital Markets: A review of Theory and Empirical Work†Journal of Finance, XXV, No.2, pp.383-417.

Fama, Eugene, and French, Kenneth R. "Permanent and TemporaryComponents of Stock Prices, "Journal of Political Economy, 96 (April1988), pp. 246-273.

Fama, E., Fisher, L., Jensen, M. and Roll, R. (1969)

“The Adjustment of Stock Prices to new Information†International Economic Review, 10, No.1, pp.1-21.

Firth, Michael. "The Information Content of Large Investment Holdings," Journal of Finance, XXX, No 5 (Dec. 1975), pp. 1265-1281.

Grier, Paul, and Albin, Peter. "Non-Random Price Changes in Association with Trading in Large Blocks," Journal of Business, 46, No 3 (July 1973), pp. 425-433.

Kraus, Alan, and Stoll, Hans. "Price Impacts of Block Trading on the New York Stock Exchange," Journal of Finance, XXVII, No.3 (June 1972), pp. 569-588.

Leroy, Stephen F., and Porter, Richard D. "The PresentValue Relation: Tests Based on Implied Variance Bounds," Econometrica (1981), pp. 555-574.

Lorie, James, and Neiderhoffer, Victor. "Predictive and Statistical Properties of Insider Trading," Journal of Law and Economics, 11 (April 1968), pp. 35-53.

Obaidullah, M., 1991 "The Distribution of Stock ReturnsChartered Financial Analyst, November 1991.

Obaidullah, M., 1991a, Earnings, Stock Prices & Market Efficiency: Indian Evidence, Securities Industry Review, Journal of the Singapore Securities Research Institute, October.

Obaidullah, M. "Stock prices adjustment to half-yearly earnings announcement –

A test of market efficiency," Chartered Accountant, Vol.38, (1990),pp. 922-924.

Roll, R. and Ross, S.A. (1994), “On the Cross-Sectional Relation between Expected Returns and Betas", Journal of Finance, Vol.49, Issue 1, pp 101-121.

Shiller, Robert J."Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?" American Economic Review (June 1981), pp.421-436.

Shiller, Robert J."Theories of Aggregate Stock Price Movements," The Journal of Portfolio Management (Winter 1984), pp. 28-37.

Srinivasan, N. P and M.S. Narasimhan, 1988, Testing Stock Market Efficiency Using Risk-Return Parity Rule, Vikalpa, April-June, Vol.13, No.2, pp. 61-66.

Srinivasan. R (1997), 'Security Prices Behaviour Associated with Right-Issue related Events', The ICFAI Journal of Applied Finance, Vol 3, No.3,pp.71-81.

Stickel, Sco E. "The Effect of Value Line Investment Survey Rank Changes on Common Prices of," Journal Financial Economics, 14, No 1 (March 1985), pp.121-144.