Do the stock prices of brics follow random walk

Various anomalies occurred during last decade put many theoretical frameworks on trial and random walk is one of them. Random walk theory connotes that stock prices always follow a random walk. The theory also rejects any possibility of making consistent abnormal gains through following market games i.e. purchasing undervalued security and selling overvalued one. The theory argues that since security prices react to market innovations, it is not possible to forecast them accurately and beat the market. However, the other group of economists believe that market is predictable to some extent. This school of thought asserts that prices move in trend and through the proper analysis of past prices, one may detect the trend to forecast the future prices. In this context the present study investigates the price movement in BRIC nations through Jarque Bera test, Durbin Watson statistics, Breusch-Godfrey test, Augmented Dickey Fuller test, Phillips Perron unit root test and Runs test. Durbin Watson statistics indicates positive autocorrelation of the stock prices. All other statistical test employed in the study also witnesses the presence of correlation of current stock prices with their previous price. Therefore an active investor may get an opportunity to earn abnormal gains in BRIC nations.