Abstract:
This paper presents the results of tests on the weak form of Efficient Market Hypothesis applied to carbon efficient stock market indices of India, the United States of America (USA), Japan, and Brazil and their corresponding market indices which are used as their benchmark indices. In this study, Kolmogrov-Smirnov and Shapiro-Wilk tests are used to test the normality of data. Run test and auto-correlation test are used to check the randomness of the data. The tests are performed using daily closing prices for the whole sample period. It is found from the statistical tests that the daily closing prices do not follow random walks in all the four countries. However, monthly returns are following random walk in case of India, USA, and Brazil, but not in case of Japan.
Machine summary:
Research Scholar (Accounting and Finance) Fellow Programme in Management (FPM) Indian Institute of Management, Tiruchirappalli Tiruchirappalli-620015 Tamil Nadu, India (Received: 20 January, 2016; Revised: 15 May, 2016; Accepted: 23 May, 2016) Abstract This paper presents the results of tests on the weak form of Efficient Market Hypothesis applied to carbon efficient stock market indices of India, the United States of America (USA), Japan, and Brazil and their corresponding market indices which are used as their benchmark indices.
EMH has a significant role to play for the academicians, regulatory authorities, and investors for making financial and investment decisions and steering and controlling the development of a newly emerging market (Clarke, Jandik & Mandelker, 2001).
The presence of a separate index to track the movement of carbon efficient companies in the stock market is useful as investors can make a better and informed investment decision (Tripathi & Bhandari, 2012).
Therefore, the present study attempts to investigate the possibility of generating more than normal return by resorting to technical analysis in carbon efficient indices as well as their corresponding benchmark indices and thereby testing the weak form of efficient market hypothesis in both indices of the select countries.
Conclusion and policy implications From the analysis done above, it is revealed that the movements of the carbon efficient stock indices of India, USA, Japan, and Brazil as well as their respective benchmark market indices are not random, leading to the rejection of the weak form of EMH.