503 Random walk analysis with multiple structural breaks: Case study in emerging market of S&P BSE sectoral indices stocks G. Sheelapriya and R. Murugesan Department of Humanities, National Institute of Technology, Tiruchirappalli, India Abstract As the consequences of high volatile and time varying mean in the financial series, it causes behavioural changes in the stochastic trend is known as a structural break. The aim is to investigate the number of unknown structural breaks for the emerging market of S&P 500 indices which are listed on BSE, by employing BP unit root tests. This empirical study examines the random walk hypothesis by testing the unit root in the presence of unknown structural breaks. The concern in the traditional unit root test is to fail the rejection of null hypothesis. This issue has been trounced by the BP tests and it significantly locates the unknown structural breaks in the data containing differed error distribution and error heteroskedasticity. In this paper, ADF, Phillips Perron and KPSS tests have been employed to examine the unit root hypothesis, and hence to predict the unknown structural breaks. Then all the sectoral indices have been forecasted in the presence of the structural breaks using Markov switching AR (1) process. Keywords: Multiple structural breaks, unit root, random walk, efficient market hypothesis, Markov switching AR (1) model Introduction 1 The objective of the study is to investigate the random walk hypothesis and the numbers of unknown multiple structural breaks for the emerging market in India for the twelve sectors which are listed on BSE. Recent research has focussed on testing the efficiency of the emerging market countries due to the fact that, for the past decade the rate of growth returning in the emerging markets are all together relatively higher than in the emergent countries. Such kind of this occasional trend has been increasing the attention of researchers to investigate the efficiency of the market testing by the random walk hypothesis. So far the vast numbers of literature have been investigated about the random walk hypothesis by applying unit root test. The main issue in the unit root test is unable to reject the null hypothesis of unit root in the presence of unknown structural breaks in the stock prices. Initially this idea was proposed by Perron (1989) for known structural breaks date. Later studies by Zivot and Andrews (1992), Papell (1997), Perron (2006) and Narayan and Popp (2010) have investigated one or two endogenous structural breaks. The study focuses on contributing the literature in the following way; first we extend the literature on the Indian stock market efficiency by examining the random walk hypothesis using the unit root test. Secondly we are extending the literature on testing the multiple structural breaks in the Indian stock market data. And this each sectoral indices stock has been split into Corresponding author's Name: G. Sheelapriya Email address: sheelamathspriya@gmail.com Asian Journal of Empirical Research journal homepage: http://aessweb.com/journal-detail.php?id=5004