Testing the Week Form Efficiency of Pakistani Stock Market (2000-2010)

Abdul Haque · Hung Chun Liu · Fakhar Un Nisa

21 citations0/0 files storedInternational Journal of Economics and Financial Issues

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Financial Markets and Investment Strategies Financial Risk and Volatility Modeling Stock Market Forecasting Methods

Abstract

This empirical paper tests out the weak form efficiency of Pakistani stock market by examining the weekly index over the period . Return series has a leptokurtic and negatively skewed distribution, which is away from normal distribution as reflected by significant Jarque-Bera statistic. Estimated results of ADF (1979), PP (1988) and KPSS (1992) tests, Ljung-Box Q-Statistic of autocorrelations and runs test of randomness reject the Random Walk Hypothesis (RWH) for the returns series. Moreover the results of variance ratio test (Lo and MacKinlay (1988)) also reject the RWH and prove the robustness of other estimated results. The rejection of RWH reveals that the Pakistani stock prices are not Weak Form Efficient.Keywords: Weak Form Efficiency; Variance Raito; Random WalkJEL Classifications: C22; G12; G14

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1979Distribution of the Estimators for Autoregressive Time Series With a Unit Root 1970EFFICIENT CAPITAL MARKETS: A REVIEW OF THEORY AND EMPIRICAL WORK*1988Testing for a Unit Root in Time Series Regression 1992Testing the null hypothesis of stationarity against the alternative of a unit root 2012The Econometrics of Financial Markets 2002Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis 1988Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test 1980On the Impossibility of Informationally Efficient Markets

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