Market Adaptability and Evolving Predictability of Stock Returns: An Evidence from India

Biswabhusan Bhuyan (), Subhamitra Patra () and Ranjan Kumar Bhuian ()
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Biswabhusan Bhuyan: Indian Institute of Technology Kharagpur
Subhamitra Patra: Indian Institute of Technology Kharagpur
Ranjan Kumar Bhuian: North Orissa University

Asia-Pacific Financial Markets, 2020, vol. 27, issue 4, No 6, 605-619

Abstract: Abstract This study attempts to examine the adaptive market hypothesis and evolving predictability of stock returns using four decades of daily data from the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in India. The recent developed automatic portmanteau ratio (AVR) and wild bootstrap automatic variance ratio (WAVR) test are used for analysis. We also estimate both the AVR and WAVR statistics in the rolling window framework to examine evolving predictability. The results revealed that BSE and NSE are informationally inefficient in the weak-form. The results of rolling window analysis suggested that the degree of predictable patterns evolves over the period due to global and regional economic and non-economic events. Further, the study compare which stock market is more efficient and found that NSE is more efficient than BSE. The findings of this study provide essential inputs to investors on trading strategies in dynamic economic situations and policymakers to formulate an appropriate policy that can make the Indian stock markets efficient.

Keywords: Informational efficiency; Adaptive market hypothesis; Emerging stock markets; Financial crises; G14; G4; G10; G01 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10690-020-09308-2

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