The present study attempts to examine the random movements in stock indices in the Indian equity market. It tests the random walk hypotheses in daily, weekly and monthly returns of six Indian stock market indices from January 2000 to October 2009. The indices considered for the purpose of the study include Nifty, CNX Nifty Junior, NSE 500, SENSEX, BSE 100 and BSE 500. The study uses Jarque-Bera (JB) Test for testing normality in return series. It also applies Box Pierce Q-Statistics and Ljung-Box (LB) statistics, and Augmented Dickey-Fuller (ADF) test to test whether return series follow random walk or not. The results indicate that there are no random movements in share indices. However, when we apply Lo and MacKinlay (1988) variance ratio test under the assumptions of both homoskedasticity and heteroskedasticity, we observe contradictory results. It is also found that sometimes heteroskedasticity is the source of non-random behavior in share indices.

The concept of market efficiency has received significant importance in the world of finance. It is an important area of research for academicians. In this regard, there is always an incongruous opinion between the professional stock market analysts and the academicians. The professional analysts (fundamental analysts and technical analysts) opine that trends always exist in the market, with the help of which the traders can obtain abnormal profits. They go by the premise that all the traders in the markets do not have perfect knowledge about the market conditions, and hence, the traders who obtain the information earlier than others can enjoy abnormal gains. Even though both fundamental and technical analysts believe in the same premise, they follow different approaches in obtaining the information. Academicians believe in random movements in stock prices and explain that making supernormal gains on a consistent basis is impossible. If abnormal gains exist at any point of time, they attribute the same to luck or random chance or God’s event, rather to the skill of the analysts.

The present study focuses on random walk hypothesis which says that there is no serial correlation between historical price trends and future price changes. In the study, an effort is made to observe if there is any statistical dependence in return series of six market indices in the Indian equity market from the period January 2000 to October 2009. Thus, objective of the study is to observe whether movements in stock indices are random or not. The presence of randomness in share price movements makes the job of technical analysts futile, indicating that the market is efficient in weak form.

Applied Finance Journal, Winter Blues, Stock Market Returns, Tunisian Stock Exchange, Trading Strategies, Stock Market Anomalies, Tunisian Stock Market, OLS Regression Method, Clinical Research, Risk Aversion.