The Impact of Global Financial Crisis on Market Efficiency: An Empirical Analysis of the Indian Stock Market


  •  Jyoti Gupta    
  •  Sardana Sankalp    

Abstract

This paper analyses the impact of the Global Financial Crisis on the informational market efficiency of the Indian Stock Market. In particular, the research focuses on analysing the stock market behaviour in three different sub-periods: Pre-Crisis, Crisis and the Recovery period. Various statistical methods, both parametric and non-parametric tests are employed to check if the market follows a random walk process. This helps in assessing the efficiency of the market. The results of the analysis show that the market is weak form inefficient in all three sub-periods. The informational market efficiency improved marginally from the Pre-Crisis period to the Crisis period and increased further from the Crisis period to the Recovery period. The informational inefficiency is an important criterion for the smooth functioning of the market because in an informationally inefficient market, the securities are not always fairly priced and this provides an incentive to traders to collect and use the relevant information to devise trading strategies which helps them in earning abnormal returns.


This work is licensed under a Creative Commons Attribution 4.0 License.