Implications of Behavioral Finance on the Efficiency of Indian Capital Market An Empirical Analysis

Abstract

The effort to understand the stock market so that the investors benefit by investing in the market has been quit old. The earlier studies tried to understand the effect of information dissemination and information asymmetry in the market. These studies, tried to answer the anomalies which have made price unpredictable and thereby reaping profit from the stock market almost impossible. These anomalies lead to the belief that market is efficient as the price of the market use all the information and it is not possible to beat the market by possession of extra information. These forms of discussion gave rise to the popular theory of efficient market hypothesis (EMH). The study of the EMH yield mixed result. The part success of the EMH leads to development of deeper study of the market. One of such studies lead to the development of Behavioral finance which could be termed as study of bias of the market resulted out of the human behavior bias. This thesis, try to understand the evolution of EMH to Bias study in context of the Indian Market and try to find the implication of the behavioral biases on the Indian stock market. The study uses National Stock exchange data for a period of fifteen years.