Executive Summary of The Report of The Minor Research Project Submitted to the University Grants Commission, South West Regional Office, Banglore by Dr. Philip Varughese( Porattoor), Associate Professor, Dept. of Commerce, St.Thomas College, Kozhencherry

WEAK FORM INFORMATIONAL EFFICIENCY OF THE INDIAN STOCK MARKET

Dr. Philip Varughese( Porattoor)


An efficient, articulate and developed financial system is indispensable for the rapid economic growth of any country or economy. The Indian capital market is looking very promising in the present times. The policies regarding the capital market have been revised and the factor of transparency and investor’s security is considered as the most important aspect of the market. The previous decade saw access to global capital becoming easier for the Indian corporate sector and size multiplied through some of the largest global acquisitions by Indian conglomerates. The feasibility of stock market analysis primarily depends upon the extent of market efficiency. Therefore, the study attempts to test the behavior of movements in stock prices leading to the assessment of the market efficiency in the Indian stock market. It is done by testing the randomness of both monthly market return and monthly security return.

Monthly market return during the period of analysis. The empirical results disclose that:-

Monthly Market Return during the Sub-Periods. The empirical analysis conducted during different sub-periods discloses that-

During the second sub-period

During the third sub-period

The application of parametric and non-parametric tests confirms that the monthly market return follows randomness during the whole and sub-periods of the analysis.

For a better clarity of the results obtained under the analysis of the monthly market return, the monthly security return of the sample companies are also analysed during the period of analysis disclose that-

The application of parametric and non-parametric tests confirms that the monthly security return follows randomness during the period of study.

Market efficiency is a concept that explains how accurately stock prices reflect the information available to the public. The results of the study over the period based on monthly market return and monthly security return to test the weak form market efficiency in India confirms that the returns show randomness and the market is in weak form efficient. This signifies that changes in stock prices show independent behavior and are dependent on new pieces of information that are received but within themselves are independent of each other. Each price change is independent of other prices changes because each change is caused by a new piece of information.

As an investor, before making any investment decision market efficiency can be considered for potential investment opportunities. A change occurs in the price of stock only because of certain changes in the economy, Industry or Company. Information about these changes alters the stock prices immediately and the stock moves to a new level depending on the type of information. This rapid shift to a new equilibrium level whenever new information is received is a recognition of the fact that all information which is known is fully reflected in the price of the stock.