Testing the Adaptive Market Hypothesis and Time-Varying Efficiency in the Indian Equity Market
The study examines the adaptive market hypothesis (AMH) as an evolutionary principle of the alternative efficient market hypothesis in the Indian stock market (Sensex and Nifty50) on the daily return from April 2014 to May 2020. Based on AMH, investors behave, learn, and adapt to market conditions....
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Faculty of Management & Finance, University of Colombo
2024-06-01
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| Series: | Colombo Business Journal |
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| Online Access: | https://mgmt.cmb.ac.lk/cbj/wp-content/uploads/2024/07/5.-CBJ-2023-FIN-1-V15I1-Indian-Equity-Market.pdf |
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| author | Nang Biak Sing Rajkumar Giridhari Singh |
| author_facet | Nang Biak Sing Rajkumar Giridhari Singh |
| author_sort | Nang Biak Sing |
| collection | DOAJ |
| description | The study examines the adaptive market hypothesis (AMH) as an evolutionary principle of the alternative efficient market hypothesis in the Indian stock market (Sensex and Nifty50) on the daily return from April 2014 to May 2020. Based on AMH, investors behave, learn, and adapt to market conditions. This distinction of dynamic market conditions is divided into bull and bear market classifications. We apply three variations of the variance ratio test and the returns have been whitened using the Autoregressive model with generalized autoregressive conditional heteroskedasticity (AR-GARCH) approach to examine the nonlinear predictability test. Further, we evaluate a fixed-length subsample window framework to detect the time-varying predictability and examine whether market conditions affect stock return predictability and market condition. The study confirms inefficient market behaviour during crises, fear, panic, macroeconomic events and each market adapts differently to certain market conditions. Furthermore, the return series exhibits significant periods of efficiency and inefficiency consistent with the adaptive market hypothesis. The evidence of our findings sheds light on efficient market behaviour in dynamic market conditions and market environments for researchers, investors in investment strategies and policy intervention in risk containment measures and control market manipulation. |
| format | Article |
| id | doaj-art-1b5db8f0d7024774996eaa4a2e1d0817 |
| institution | Kabale University |
| issn | 1800-363X 2579-2210 |
| language | English |
| publishDate | 2024-06-01 |
| publisher | Faculty of Management & Finance, University of Colombo |
| record_format | Article |
| series | Colombo Business Journal |
| spelling | doaj-art-1b5db8f0d7024774996eaa4a2e1d08172025-01-04T07:53:24ZengFaculty of Management & Finance, University of ColomboColombo Business Journal1800-363X2579-22102024-06-0115110513510.4038/cbj.v15i1.172Testing the Adaptive Market Hypothesis and Time-Varying Efficiency in the Indian Equity MarketNang Biak Sing0https://orcid.org/0000-0001-5601-1700Rajkumar Giridhari Singh1School of Management Studies, Cochin University of Science and Technology, IndiaSchool of Management Studies, Cochin University of Science and Technology, IndiaThe study examines the adaptive market hypothesis (AMH) as an evolutionary principle of the alternative efficient market hypothesis in the Indian stock market (Sensex and Nifty50) on the daily return from April 2014 to May 2020. Based on AMH, investors behave, learn, and adapt to market conditions. This distinction of dynamic market conditions is divided into bull and bear market classifications. We apply three variations of the variance ratio test and the returns have been whitened using the Autoregressive model with generalized autoregressive conditional heteroskedasticity (AR-GARCH) approach to examine the nonlinear predictability test. Further, we evaluate a fixed-length subsample window framework to detect the time-varying predictability and examine whether market conditions affect stock return predictability and market condition. The study confirms inefficient market behaviour during crises, fear, panic, macroeconomic events and each market adapts differently to certain market conditions. Furthermore, the return series exhibits significant periods of efficiency and inefficiency consistent with the adaptive market hypothesis. The evidence of our findings sheds light on efficient market behaviour in dynamic market conditions and market environments for researchers, investors in investment strategies and policy intervention in risk containment measures and control market manipulation.https://mgmt.cmb.ac.lk/cbj/wp-content/uploads/2024/07/5.-CBJ-2023-FIN-1-V15I1-Indian-Equity-Market.pdfadaptive market hypothesismarket efficiencytime-varying predictabilityindian stock marketmarket conditions |
| spellingShingle | Nang Biak Sing Rajkumar Giridhari Singh Testing the Adaptive Market Hypothesis and Time-Varying Efficiency in the Indian Equity Market Colombo Business Journal adaptive market hypothesis market efficiency time-varying predictability indian stock market market conditions |
| title | Testing the Adaptive Market Hypothesis and Time-Varying Efficiency in the Indian Equity Market |
| title_full | Testing the Adaptive Market Hypothesis and Time-Varying Efficiency in the Indian Equity Market |
| title_fullStr | Testing the Adaptive Market Hypothesis and Time-Varying Efficiency in the Indian Equity Market |
| title_full_unstemmed | Testing the Adaptive Market Hypothesis and Time-Varying Efficiency in the Indian Equity Market |
| title_short | Testing the Adaptive Market Hypothesis and Time-Varying Efficiency in the Indian Equity Market |
| title_sort | testing the adaptive market hypothesis and time varying efficiency in the indian equity market |
| topic | adaptive market hypothesis market efficiency time-varying predictability indian stock market market conditions |
| url | https://mgmt.cmb.ac.lk/cbj/wp-content/uploads/2024/07/5.-CBJ-2023-FIN-1-V15I1-Indian-Equity-Market.pdf |
| work_keys_str_mv | AT nangbiaksing testingtheadaptivemarkethypothesisandtimevaryingefficiencyintheindianequitymarket AT rajkumargiridharisingh testingtheadaptivemarkethypothesisandtimevaryingefficiencyintheindianequitymarket |