The market in which all the available information is absorbed and reflected in the prices without much of time gap can be called as the efficient market. In an efficient market, there is no further scope for earning abnormal profits. In the finance literature, the market efficiency tests have been put under the category of efficient market hypothesis (EMH). Since it is extremely difficult to test the market efficiency in its absolute form, the researchers have divided the market efficiency into three forms. They are weak, semi-strong and strong forms. This study investigates the random walk hypothesis by taking the daily closing prices of prominent stock market indices. The autocorrelation test, Runs test, unit root test, variance ratio test, integrated generalised autoregressive conditional heteroscedasticity (GARCH) (1, 1), threshold GARCH (TGARCH) and exponential (EGARCH) models are used to test the hypothesis that the stock markets follow random walk. Our results show that market indices do not follow random walk.
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