Analysing Randomness of Security Prices: A Study on Pharmaceutical Sectors in Indian Stock Markets

In the pace of economic and industrial development along with the process of globalization and liberalization empowered the private sectors to penetrate into capital markets, which was predominated by public sectors? These two sectors inextricably mixed up to influence the stock markets as the fund mobilization centers for the shake of industries and trade. In recent past, due to the rapid increase of financial demand by the varieties of business enterprises generated anew economic era in which the capital market plays a key role for flow of funds. Concomitant with this, there has been a rise in the capital markets underscoring the importance of flow of funds inwhich the demand for the capital funds developed by business ventures could be met by supply of funds is set in capital markets and the efficiency of the process is essential for ensuring that these capital resources are used optimally. If there is any inefficient performance of the capital market, asset market will become considerably speculative in addition to sub‐optimal allocation of resources. In an efficient market, all the information is reflected in security price. Efficient stock prices and yields provide benchmarks against which the cost of capital for and return on investments projects can be judged, even if such projects are not financed through stock market. Under this light, thepresent study has been carried out on pharmaceutical stocks to highlight whether the market isefficient enough in pricing the securities. A run test is used to test the independent ness of successive price changes at an aggregate level as well as at individual stock level. Again, the random walk hypothesis is studied for security prices in pharmaceutical sector.