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The Random-Walk Hypothesis on the Indian Stock Market

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  • Ankita Mishra
  • Vinod Mishra
  • Russell Smyth

Abstract

This study tests the random walk hypothesis for the Indian stock market. Using 19 years of monthly data on six indices from the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), this study applies three different unit root tests with two structural breaks to analyse the random walk hypothesis. We find that unit root tests that allow for two structural breaks alone are not able to reject the unit root null; however, a recently developed unit root test that simultaneously accounts for heteroskedasticity and structural breaks, finds that the stock indices are mean reverting. Our results point to the importance of addressing heteroskedasticity when testing for a random walk with high frequency financial data.

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File URL: http://www.buseco.monash.edu.au/eco/research/papers/2014/0714randommishrasmyth.pdf
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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 07-14.

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Length: 28 pages
Date of creation: Apr 2014
Date of revision:
Handle: RePEc:mos:moswps:2014-07

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Related research

Keywords: India; Unit root; Structural Break; Stock Market; Random Walk;

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