Testing of Efficient Market Hypothesis: a study on Indian Stock Market

Abstract

Market efficiency refers to the accuracy and quickness with which prices reflect market related information. In the weak form of the market, current price reflect all the information found in past prices and traded volumes. Further, prices cannot be predicted by analysis of past prices. Everyone has access to past prices even though some people can get these more easily than others. Liquidity traders may sell their stocks without considering the intrinsic value of the shares and cause price fluctuations. Buying and selling of the information traders lead the market price to align itself with the intrinsic value. The filter rule, runs test and serial correlation are adopted to find out market efficiency. In this paper runs test has been used to find out market efficiency. The stock price of the selected companies has been taken from NSE (National Stock Exchange).