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The Impact of Global Financial Crisis on Market Efficiency: An Empirical Analysis of the Indian Stock Market

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  • Jyoti Gupta
  • Sardana Sankalp

Abstract

This paper analyses the impact of the Global Financial Crisis on the informational market efficiency of the Indian Stock Market. In particular, the research focuses on analysing the stock market behaviour in three different sub-periods: Pre-Crisis, Crisis and the Recovery period. Various statistical methods, both parametric and non-parametric tests are employed to check if the market follows a random walk process. This helps in assessing the efficiency of the market. The results of the analysis show that the market is weak form inefficient in all three sub-periods. The informational market efficiency improved marginally from the Pre-Crisis period to the Crisis period and increased further from the Crisis period to the Recovery period. The informational inefficiency is an important criterion for the smooth functioning of the market because in an informationally inefficient market, the securities are not always fairly priced and this provides an incentive to traders to collect and use the relevant information to devise trading strategies which helps them in earning abnormal returns.

Suggested Citation

  • Jyoti Gupta & Sardana Sankalp, 2017. "The Impact of Global Financial Crisis on Market Efficiency: An Empirical Analysis of the Indian Stock Market," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(4), pages 225-252, April.
    • Handle: RePEc:ibn:ijefaa:v:9:y:2017:i:4:p:225-252
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    References listed on IDEAS

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    Cited by:

    1. Siva Kiran & Prabhakar Rao.R, 2019. "Analysis of Stock Market Efficiency in Emerging Markets: Evidence from BRICS," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 22(72), pages 60-77, June.
    2. Lars Tegtmeier, 2021. "Testing the Efficiency of Globally Listed Private Equity Markets," JRFM, MDPI, vol. 14(7), pages 1-16, July.

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    More about this item

    Keywords

    Indian stock market; financial crisis; random walk process; abnormal returns; market efficiency; SEBI; statistical tests of informational inefficiency; Bombay stock market; National stock market;
    All these keywords.

    JEL classification:

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

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