Portfolio Management in a Dynamic Market Environment A Study of Adaptive Market Hypothesis in the Indian Stock Market

Abstract

This doctoral work studies the theory of adaptive market hypothesis in the Indian stock market by analyzing the patterns of return predictability, trading strategy involving the market anomaly of turn of the month effect and the causal dynamics between price and volume under varying market conditions. The time period considered for the study is 4th April 2005 to 5th July 2022. The analysis is carried out at the aggregate market level, sector level and the individual firm level using four indices and thirty-seven companies listed on the National Stock Exchange of India over the sample period. newlineTo investigate the return predictability aspect of our analysis we have made use of the weekly returns data and applied a Generalized Spectral Test under a rolling window framework of fixed one-year window length to our sample. We find that the Indian market shifts between periods of efficiency and inefficiency and the non-linear dynamics indicate the return predictability to be highest with the changes in the financial environment in the form of global crisis or policy changes. newline