Topic: A Study of Informational Efficiency in Nifty 50 - Event Study.

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Sushanta Joydeep Lahiri

Abstract

Market efficiency and asset pricing  has been intriguing topic for all financial economists.  Researchers have been actively studying on the various aspects of market microstructure and market efficiency since 1950s. The area still holds its significance ,as newer dimensions are being explored.


The objective of this paper is to study Informational efficiency of Nifty -50 and how events like result announcements impacts the efficiency of individual stock. Efficient market hypothesis implies that the stocks follow random walk and it is impossible to make trading strategies in the longer run. In shorter period there may be a lag between the stock prices and new information related to the stocks, however it adjusts very quickly. In this paper we have tested for the random walk of Nifty in two different time horizon and Informational efficiency of three heavy weighted stocks of Nifty 50. Another pilot study has been calculated on top three heavy weighted stocks of Nifty -50 to check informational efficiency and how quickly stocks adjust to new information in the form of results.


The methodologies used to test the hypothesis are ‘Variance ratio’ introduced by (Lo and Mackinlay,1998)  and then used by many researchers for the test of random walk. (Omar, S. et al 2018; Cao, C. et al 2017; Charles and Darne, 2009,) and Event Study methodology. Findings of the study shows that the Nifty -50 does not follow random walk phenomenon, neither in the short long and nor in the long run. The pilot study of Informational efficiency found that two heavy weighted stocks (Reliance Industries and HDFC bank) shows that event has a significant impact on the stocks, Moreover the market was not able to factor the available information the stocks declined in the adjustment window as well. The null hypothesis of CAR being equal to 0 has been rejected and Null hypothesis is accepted. In both the test the Semi -Weak form of market efficiency has been rejected.

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How to Cite
Sushanta Joydeep Lahiri. (2023). Topic: A Study of Informational Efficiency in Nifty 50 - Event Study. European Economic Letters (EEL), 13(3), 370–376. https://doi.org/10.52783/eel.v13i3.263
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