Title: Dynamics of randomness and efficiency in the Indian stock markets

Authors: S. Sujeesh Kumar; V. Nandamohan

Addresses: RBI Officers Quarters, S2/123, Gokuldham, Goregaon East, Mumbai-63, Maharashtra, India ' Anantham, Punnakkal Road, East Fort, Thiruvananthapuram, Kerala, India

Abstract: This paper analysed the behaviour of randomness and efficiency in the Indian stock markets in view of the efficient market hypothesis (EMH) and adaptive market hypothesis (AMH). We have examined the randomness in detail and found that there has been no uniformity or trend in randomness and further, efficiency is time varying. Although inefficiencies were evidenced during the period of study (1990-2014), improvement in efficiencies has been observed in some pockets of time, implying greater adaptability in the markets-BSE Sensex and NSE Nifty. Based on the Lyapunov exponent, indication of nonlinear deterministic chaos also detected. The extent of randomness has been compared between both the markets using an entropy measure.

Keywords: randomness; runs; variance ratio; market efficiency; chaos; entropy.

DOI: 10.1504/IJFMD.2018.097491

International Journal of Financial Markets and Derivatives, 2018 Vol.6 No.4, pp.287 - 320

Received: 06 Feb 2018
Accepted: 17 Sep 2018
Published online: 24 Jan 2019 *

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