Predicting the Stock Market Efficiency in Weak Form: A Study on Dhaka Stock Exchange
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Date
2018
Journal Title
Journal ISSN
Volume Title
Publisher
EconJournals
Abstract
This study aims to examine the efficiency of Dhaka Stock Exchange (DSE) in the weak form using random walk model of Efficient Market Hypothesis
(EMH) based on daily return series. The study applies both non-parametric (Kolmogorov–Smirnov test with Lilliefors coefficient, run test) and
parametric test (autocorrelation test, unit root test and variance ratio test) on DSE general index, DSE broad index (DSEX) and DSE30 index ranging
from June 1, 2004, to March 18, 2018. The results of the study show that the normality test and unit root test reject the null hypothesis of randomness
while the result of the run test shows that only the share prices of DSE30 index follow the random walk out of three indices. Besides, the return series
of DSE broad index show some signs in favour of randomness by autocorrelation test and the returns of DSE general index support the efficiency
concerning variance ratio test under both homoscedastic and heteroskedastic assumptions. The overall results of the study show inefficiency of DSE
in the weak form which means the investor has a chance to make an abnormal profit predicting the historical data. This study also provides valuable
insight to the shareholders, investors, the board of directors and regulatory bodies.
Description
Keywords
Stock Market, Weak Form Efficiency, Stock market efficiency, Dhaka Stock Exchange, Efficient Market Hypothesis
Citation
Volume 8 Issue 5; 2018; Page: 88-95