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Is Socially Responsible Indices Weak Form of Efficient Market? Evidences from Developing Economies

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  • Sabyasachi Mondal
  • Ranjit Singh

Abstract

The study is an attempt to identify the presence of randomness in the socially responsible indices (SRI) of the stock markets of developing countries. Five developing economies are considered for the test of randomness on daily, weekly, monthly, quarterly and semiannual return of socially responsible indices and their benchmark indices. Shapiro-Wilk test is used to test the normality of the data whereas Runs test and Augmented Dickey-Fuller test are used depending on the randomness of the data. It is observed that India, Arab and Egypt show non-randomness whereas Brazil and South Africa show randomness in daily returns. Weekly returns on the other hand are random in Brazil, Arab, South Africa, and non-random in India and Egypt. Monthly and quarterly returns show randomness in India, Arab, Egypt, South Africa and non-randomness in Brazil whereas semiannual returns show randomness for all economies. It is also observed that most socially responsible indices resonate the randomness patterns of their benchmark indices. Most of the non-randomness is seen in short-run indicating inefficiency in the market. However, in long-run, the market goes random or efficient which is an indication that more than average profit can be earned by resorting to technical trading in the short run. Moreover, the similarity in randomness between socially responsible indices and their benchmark indices indicates that similar trading strategy can be applied by traders in both these indices to garner profit.

Suggested Citation

  • Sabyasachi Mondal & Ranjit Singh, 2020. "Is Socially Responsible Indices Weak Form of Efficient Market? Evidences from Developing Economies," Asian Social Science, Canadian Center of Science and Education, vol. 16(2), pages 1-55, February.
    • Handle: RePEc:ibn:assjnl:v:16:y:2020:i:2:p:55
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    References listed on IDEAS

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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