Testing Weak Form of Market Efficiency During Pandemic

Abstract

Is it possible to make profits in stock market? Whether the modern economic system is entrenched for egalitarian society? One of the propositions of current economic system: „Efficient Market Hypothesis‟ imports that financial markets are “Informationally efficient”, means the current market price of the stocks reflect all the available information. Hence, this study investigates the weak-form efficiency during pandemic for the stocks listed in Bombay Stock Exchange, the study is done considering the data from January 2020 to April 2021, includes total observation of 331. The study is done by understanding whether stock price changes are random or is it possible to predict using historical data. The examination of the weak-form efficiency is exercised using Kolmogorov– Smirnov test, Runs Test and Autocorrelation Test. The KS test reveals that 25 companies out of 30 companies stock price changes are not normally distributed. The outcome of Runs Test reveals that stock value of 29 companies out of 30 companies follow random-walk. The Autocorrelation test renders that the changes in the price of stocks are independent. Hence, the study favour that it is difficult for a trader to use past prices to predict the future price and to make additional profit during pandemic.