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A test of the weak form of efficient market hypothesis in Indian Stock Market using momentum and contrarian effect

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  • Ramandeep Kaur
  • Rubeena Bajwa

Abstract

The current study intended to analyse efficiency of Indian Stock Market. The portfolios (momentum and contrarian) were framed over the 11 years study period, i.e., from April 2006 to March 2017 using monthly returns of BSE 500 listed stocks. The mean cumulative abnormal returns (MCAR) of different winner and loser portfolios were calculated. Portfolio performance was analysed on the basis of formation and holding periods being set at 3, 6, 12 and 36 months. Weak form efficiency was tested by using serial correlation, unit root, runs test and variance ratio test etc. The findings indicated that all single sorted portfolios could generate abnormal returns. Overall results of the study verified that by focussing purely on the past price information, Indian investors were able to earn abnormal returns in the stock market The results of the study will be a potential source for portfolio managers who are utilising or endeavouring to utilise to use the momentum and contrarian investment strategy.

Suggested Citation

  • Ramandeep Kaur & Rubeena Bajwa, 2023. "A test of the weak form of efficient market hypothesis in Indian Stock Market using momentum and contrarian effect," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 35(1/2), pages 119-133.
    • Handle: RePEc:ids:ijbglo:v:35:y:2023:i:1/2:p:119-133
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