Abstract
We examine the adaptive market hypothesis using the Generalized Hurst exponent, derived using fixed and rolling windows. We find that the Indian stock market is moving towards efficiency. We also ascertain a positive and significant link between the Indian market's efficiency gap and financial crises, other international shocks and major domestic policy and crisis-related events. Net foreign institutional investment increases the efficiency gap, although the impact is less for international events. Foreign institutional investment and market microstructure factors do not influence efficiency in an emerging market. This evidence would benefit a stock market liberalization policy review.
Original language | English |
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Pages (from-to) | 173-180 |
Number of pages | 8 |
Journal | Finance Research Letters |
Volume | 19 |
DOIs | |
Publication status | Published - Nov 2016 |
Externally published | Yes |
Keywords
- Adaptive market hypothesis
- Economic crisis
- Financial liberalization
- India
- International capital flows
- Market microstructure
- Time-varying efficiency