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Variance ratios, structural breaks and nonrandom walk behaviour in the Indian stock returns


  • Hiremath, Gourishankar S
  • Bandi, Kamaiah


The paper investigates the issue of behaviour of stock returns in India. A non-parametric variance ratio test is used to examine the issue. Largely the results indicate non-random walk behaviour of Indian stock market. However, the sub-sample analysis of stock returns based on structural breaks show an increasing mean-reverting tendency after occurrence of structural breaks in the series. The events associated with break dates mainly are volatile exchange rate movements, oil shocks, internet bubble burst, sub-prime crisis, global economic meltdown and political uncertainties. Rejection of random walk is relatively stronger for smaller and medium indices than larger indices implying that market capitalization and liquidity play a greater role in improving efficiency of the market.

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  • Hiremath, Gourishankar S & Bandi, Kamaiah, 2012. "Variance ratios, structural breaks and nonrandom walk behaviour in the Indian stock returns," MPRA Paper 48710, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:48710

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    References listed on IDEAS

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    Cited by:

    1. Hiremath, Gourishankar S & Kumari, Jyoti, 2014. "Stock returns predictability and the adaptive market hypothesis in emerging markets: evidence from India," MPRA Paper 58378, University Library of Munich, Germany.

    More about this item


    Variance ratio; random walk; market efficiency; mean-reversion; BSE; NSE; Indian stock market.;

    JEL classification:

    • G0 - Financial Economics - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation


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