Efficient Market Hypothesis (EMH) has been examined in three different forms-the weak, semi-strong and strong. This paper examines the efficiency of the Indian stock market in the semi-strong form. The June 2003 quarterly earnings announcement dates were taken as the event-day. The study is based on sensitive index (Sensex) based companies of the Stock Exchange, Mumbai (the BSE). Returns were computed using the price data of companies and the Sensex (the market index). The Abnormal Returns (AR), Average Abnormal Returns (AAR), and Cumulative Average Abnormal Returns (CAAR) were computed based on the single index model. The behavior of these variables was examined for 30 days before and after the event-day.
The results indicated that AARs have been fluctuating widely yielding more number of positive than negative returns. The CAAR has been fluctuating some days before the event-day. However, after the event-day, CAAR has been falling and rising continuously forming successive bottoms and tops which are higher than the previous ones. In an efficient market, CAAR should flatten out after the event-day to indicate that the market has absorbed the results quickly. The results of this study show that positive ARs persisted after the event-day. The trend of CAAR indicated that it rose continuously even several days after the event-day. Therefore, the Indian market is not efficient in the semi-strong form. The results further indicated that June 2003 quarterly results gave positive signals to Indian markets and anyone who studied the market could earn abnormal returns
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