Random Walk and Indian Equity Futures Market

Abstract

The present study investigates weak form of efficiency in Indian equity futures market. For this purpose, informational efficiency of the Nifty futures and 24 stock futures is examined. The Nifty and stock futures returns are found to be deviating from normal distribution. The futures prices are found to be nonstationary at levels whereas, first difference futures returns are stationary. Empirical analysis finds evidence of statistical dependence in the returns generating process. Further analysis through Autoregressive Integrated Moving Average (ARIMA) process reveals that the Nifty and stock futures returns are not independent and shows strong dependencies.

Keywords: Random walk, Indian equity markets, Futures market, weak form efficiency, Nifty futures, price behaviour in markets