MM's Institute of Management Education Research and Training, Pune, India
JEL: G1 G11 AND G14
In the financial literature Efficient Market Hypothesis (EMH) has been one of the dominant topics. An implication of weak-form of efficiency/random walk is that the trading rules will not generate economic profits. The purpose of this study is to analyze results of application of trading range breakout (TRB) test on weekly stock prices of Indian Markets, thus investigating its efficiency at the weak form level (Fama, 1970). In this study three different strategies viz. Buy, Sell and Buy-Sell of TRB trading rule have been tested on weekly stock prices on 200 stocks from Indian Stock markets over different time periods to test Weak Form of Efficient Market Hypothesis (WFEMH). The results from the TRB trading rule tests indicated that the technical trading rules do not yield statistically significant forecasting power. It means that forecasting of returns based on trading rules cannot be employed to earn abnormal returns.
Indian Stock Markets, Trading Range Breakout, Trading Rule Test, Weak Form Market Efficiency
