Testing the Stock Market Efficiency Using Random Walk Hypothesis : A Study of Selected Non Specified Shares

In recent years, there has been greater concern among the investors, portfolio managers and researchers regarding the behaviour of the stock market prices. The investors are interested to earn a higher return on their investments. Therefore, the portfolio managers have to examine the stock market conditions in order to advise the investors and construct a sound portfolio. In efficient markets, that is, perfect or near perfectly – competitive markets, the informed participants will eliminate all profits in excess of the bare minimum required to induce them to continue in the market. Consequently, traders cannot continue to profit from the use of other factors which depend on historical prices or other public information (Philippatos 1973).Empirical studies have been conducted to examine Random Walk Hypothesis with respect to specified shares. This paper examines the theory of random walks in stock market prices with special reference to non specified shares listed on the Bombay Stock Exchange. The analysis has been made using daily data of stock prices during the period August 1, 2001 to July 31, 2003. In addition, the market indices – BSE Sensitive Index, S & P CNX Nifty have also been tested for the specified period to examine the independence of these index series. The results show that the non specified shares as well as the market indices follow the random walk hypothesis