Testing of Market Effciency of BSE GREENEX: An Empirical Analysis Prasid Gurung 1 * and Soumitra Sarkar 2 1 Research Scholar, Department of Commerce, University of North Bengal, Siliguri – 734014, West Bengal, India 2 Associate Professor, Department of Commerce, University of North Bengal, Siliguri – 734014, West Bengal, India 91 DOI:10.18311/sdmimd/2023/32565 1. Introduction The efciency of capital market is an imperious concept to understand the operations of fnancial market. It presents the discussion on the operation and functioning of capital market especially the process of fundamental price generation (Arora, 2013). The capital market, where the investors fascinatingly pursue risk to earn higher profts (Potocki and Swist, 2015) gather as many as relevant resources regarding the price and return of respective stocks and use the same resources to predict its future movement (Dash, 2020). As such, the Efcient Market Hypothesis (EMH) simply states that it is impossible for the investors to outperform the capital market and this hypothesis was pioneered by Eugene Fama in 1970 as the ‘theory of market efciency’. Eugene Fama had discussed the theory of market efciency but it was Bachelier (1990) who came up with the intrinsic concept of EMH that the stock price movement are independent, unrelated and unpredictable. The rationale behind EMH is that all the available information of the market is already refected in the stock prices (Nelmida, 2020). In this particular kind of market, investors make the use of available market information to assess the past movement of a stock and can describe its current movement based on such past information and also predict its future movement (Bustanji, 2020). Abstract According to the United Nations Principle for Responsible Investment, an investment in a non-ESG compliance company has 28% higher risk per annum as compared to an ESG compliance company. Such company has a positive relationship with the financial performance and the investors cannot outperform these stocks as the information about sustainability compliance is readily available in the market. This concept is of the Efficient Market Hypothesis. Employing a quantitative research design, this study considered 17 companies of BSE Green Index that has considerable ESG scores and extracted their daily, weekly and monthly data to examine and understand its stock return movement and to test whether it follows the Efficient Market Hypothesis. This study makes use of the various statistical tools such as the Run Test, Auto-correlation Function and the Unit Root Test. Summarising the results of run test, Auto-correlation Function and two-unit root test i.e., Augmented Dickey Fuller test and Philips-Perron, it statistically confirmed the findings that the daily, weekly and monthly stock return series of the 17 stocks of BSE Green Index do not obey the ‘Random Walk Hypothesis’ which is the key findings of the study and hence rejects all the three hypotheses of the study. Backing the empirical findings of this study, it would be rational to state that the concept of the Efficient Market Hypothesis does not hold good in the BSE Green Index of the Indian Stock Market and this finding would be very imperative to the investors concerned about their investment decisions with regard to sustainability practices. Keywords: BSE-GREENEX, Efficient Market Hypothesis, ESG Scores, Indian Stock Market, Random Walk Model JEL Codes: G10, G14 *Email: rs_prasid@nbu.ac.in