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Test of Efficient Market Hypothesis in Indian Indices (2014)

Ref: fin0048

This dissertation focuses on the current state of EMH’s existence in top 4 Indian Indices namely Auto, Bank, IT and Pharma. If an efficient market should occur, disparity between the market price of a script and its intrinsic value, it would be exploited by savvy speculators act accordingly to benefit from this "temporary inefficiency". Speculators buy undervalued shares in order to get quick capital gains, which would create a demand pressure which would push its price up to place it in its intrinsic value. Otherwise, if the Share is overrated these same speculators would sell so that its price would fall, due to supply pressure, Script will reach its theoretical value. In short, only the brightest will draw a profit from inefficiencies time (the more speculators of this type has lower profit, the rest of participants found really believe in an efficient market). Therefore changes in the prices reflect exactly what unpredictable, it makes the series of price changes is random type, more specifically is said to follow a random walk. As we all know we cannot expect market to behave in a way that it should have to. So, it’s very much necessary to understand the efficiency of the market. The main objective of the dissertation is to understand the current state of existence of EMH in Indian Indices, to make investment decision in uncertain times. The Objective of the study is to understand the EMH’s real state of existence in top 4 indexes and CNX Nifty. CNX Nifty is a benchmark index. It includes all major industries. So, it will be helpful to take investment decisions before any upcoming events and announcements. This study only covers 4 indices listed in the Indian Market which are selected on the basis of its Market cap and Volatility.

This dissertation covers 4 indices listed in the Indian Market which are selected on the basis of its Market Cap 
and Volatility:
  • This study only covers the EMH theory based on the information level available in the market.
  • The time zone of the study is only 2 years from 2012-2013. So it doesn’t cover the current scenario or the past data

  • 10,000 words - 58 pages in length
  • Good use of literature
  • Good use of finance models
  • Well written throughout
  • Ideal for finance students


1 - Introduction
The Efficient Market Hypothesis
Weak Form Efficient Market
Semi-Strong Market Hypothesis
Strong Efficient Market Hypothesis
Statement of Problem
Need for Study
Objective of the study
Scope & Limitation of the study

2 - Review of Literature

3 - Research Methodology
Type of the Research
Sampling
Tools Used
Weak form tests
Semi Strong form tests
Strong Form Tests

4 - Analysis and Inference
CNX Sector Indices
CNX AUTO
CNX Pharma
CNX IT
Bank Nifty
Why these 4 sectors
Run Tests
Technical Indicators
Why Technical Analysis
Semi-Strong tests
Event Test
Fiscal Budget
One Way ANOVA
Strong Form Tests
Multiple Regression
GDP Growth Rate
Inflation
Interest Rate
Industrial Production
CAD
Multiple Regression- OLS

5 - Findings and Suggestions
Findings
Auto
Bank
IT
Pharma
Nifty
Suggestions
Short term Investment
Long Term Investments

6 - Conclusion

References

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