An Empirical Study of the Efficient Market Hypothesis with Reference to Selected Indian Information Technology Companies

The efficient market hypothesis (EMH) or theory states that share prices reflect all information. The EMH hypothesizes that stocks trade at their fair market value on exchanges. Proponents of EMH posit that investors benefit from investing in a low-cost, passive portfolio. Though the efficient market hypothesis (EMH), as a whole, theorizes that the market is generally efficient, the theory is offered in three different versions: weak; semi-strong; and strong. The efficient market hypothesis holds that when new information comes into the market, it is immediately reflected in stock prices; neither technical analysis (the study of past stock prices in an attempt to predict future prices) nor fundamental analysis (the study of financial information) can help an investor. At the core of EMH is the theory that, in general, even professional traders are unable to beat the market in the long term with fundamental or technical analysis. That idea has roots in the 19th century and the "random walk" stock theory. EMH as a specific title is sometimes attributed to Eugene Fama's 1970 paper "Efficient Capital Markets: A Review of Theory and Empirical Work."
The purpose of this study is to test the weak form of an Efficient Market Hypothesis in selected Information Technology stocks which are traded in Indian Indices. Monthly closing prices of Six Information Technology companies were taken for a period of two years, starting from 1st April 2023 to 31st March 2026. The conventional tests were carried out to find whether there is any evidence of Weak Form of Market Efficiency in Indian Information Technology Stocks. The result shows that selected stocks does not follow Random Walk during the study period and it was also ascertained that Indian Information Technology Stocks belong to Semi-Strong form of Efficient Market Hypothesis (EMH) Theory.
Further in this study run test has been applied for analysis of EMH Hypothesis and Six Information technology stocks were selected for setting the Hypothesis. The results show that null hypothesis is accepted and supports the findings that Indian Information Technology stocks are in Semi-Strong form of EMH. The semi strong form of EMH states that security prices fully reflect all relevant publicly available information. The public information states not only past prices but also data reported in a company’s financial statements, company’s announcements, economic factors and others.

Efficient Market Hypothesis, Strong Form, Semi-Strong Form, Weak Form, Run Test, Variance, Positive Runs, Negative Runs, Number of Occurrences.

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