Abstract:
The behaviour of stock market returns is a central issue to the theory and practice
of asset pricing, asset allocation, and risk management. The supporters of the efficient
market hypothesis (EMH) claim that stock price indices are basically random and as such
any speculation based on past information is fruitless. This paper investigates the
Random Walk (RW) behavior of stock market returns of India. The naïve random walk
model was estimated using Ordinary Least Squares (OLS) method over the period 1st
January, 2008 to 31st December, 2009. The data are obtained from the National Stock
Exchange (NSE) website, Mumbai. The study result reveals that the return series is
insignificantly different from zero, which is consistent with the random walk hypothesis.
It can be, therefore, the present study suggests that the Indian stock market is found to be
efficient and supports the random walk behaviour.
