A Study on Weak-Form of Market Efficiency in Selected Asian Stock Markets

Authors

  •   Venkata Rajasekhar Ryaly Assistant Professor, Department of Management Studies, Sri Vasavi Engineering College, Tadepalligudem, Andhra Pradesh
  •   R. S. R. K. Kiran Kumar Associate Professor, Department of Management Studies, Sri Vasavi Engineering College, Tadepalligudem, Andhra Pradesh
  •   Bhargava Urlankula Assistant Professor, Department of Management Studies, Sri Vasavi Engineering College, Tadepalligudem, Andhra Pradesh

DOI:

https://doi.org/10.17010/ijf/2014/v8i11/71842

Keywords:

Stock Market Efficiency

, Weak Form of Market Efficiency, Random Walk Hypothesis, Asian Stock Markets

G1

, G10, G14, G15

Paper Submission Date

, January 10, 2014, Paper sent back for Revision, June 5, Paper Acceptance Date, August 8, 2014.

Abstract

Efficiency of financial markets is one of the key elements indicating the performance of financial markets and the economy. In efficient markets, all transactions are done with the help of new information available about the economy, industries, and companies. Stock price movements are completely random, and are highly based on current information. The historical sequence of the prices will not provide any platform/base for the future. There might be no use of studying historical data of price changes to gain abnormal returns. The main aim of the present study was to investigate the behavior of the daily stock returns in five Asian countries, namely India, South Korea, Singapore, Hong Kong, and Japan. We employed both parametric and non-parametric tests to check the RWH (random walk hypothesis) to know the weak form of efficiency in the Asian stock markets. A common data set for all countries covering the time period from July 1997 to November 2013 was considered for the study. The results provided reasonable evidence to prove the existence of weak form of market efficiency in the selected Asian stock markets.

Downloads

Download data is not yet available.

Downloads

Published

2014-11-01

How to Cite

Ryaly, V. R., Kiran Kumar, R. S. R. K., & Urlankula, B. (2014). A Study on Weak-Form of Market Efficiency in Selected Asian Stock Markets. Indian Journal of Finance, 8(11), 34–43. https://doi.org/10.17010/ijf/2014/v8i11/71842

Issue

Volume 8, Issue 11, November 2014

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC

References

Ansari, M., & Chen, J. C. (2013). Are Asia-Pacific markets efficient an empirical investigation. Finance India, 27 (1), 61-76.

Bachelier, L. (2006). Louis Bachelier's theory of speculation: The origin of the modern finance. Princeton: Princeton University Press.

Cootner, P. H. (1962). Stock prices: Random vs. systematic changes. Industrial Management Review, 3 (2), 34-105.

Davidson, R. & MacKinnon, J. (1993). Estimation and inference in econometrics. Oxford : Oxford University Press.

Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimates for autoregressive time series with a unit root. Journal of the American Statistical Association, 74 (366), 427-431.

Fama, E. F. (1965). Random walks in stock market prices. Financial Analysts Journal, 21(5), 55-59. DOI: http://dx.doi.org/10.2469/faj.v21.n5.55

Fama, E.F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance, 25 (2), 383 - 417. DOI: 10.1111/j.1540-6261.1970.tb00518.x.

Fuller, W. (1976). Introduction to statistical time series. New York: John Wiley & Sons.

Granger, C. W. J., & Morgenstern, O. (1964). The random-walk hypothesis of stock market behavior. International Review of Social Sciences, 17(1), 1-30.

Granger, C. W. J., & Morgenstern, O. (1970). Predictability of stock market prices (1st ed.): Lexington: Heath Lexington Books.

Islam, A., & Khaled, M. (2005). Tests of weak-form efficiency of the Dhaka stock exchange. Journal of Business Finance & Accounting, 32 (7-8), 1613-1624.

Jain, K., & Jain, P. (2013). Empirical Study of the weak form of EMH in Indian stock markets. International Journal of Management and Social Sciences Research, 2 (11), 52-59.

Kendall, M. G. (1943). The advanced theory of statistics (Vol.1). London: Charles Griffin.

Ko, K. - S., & Lee, S. - B. (1991). A comparative analysis of the daily behavior of stock returns: Japan, the U.S, and the Asian NICs. Journal of Business Finance and Accounting, 18 (2), 219-234. DOI: 10.1111/j.1468-5957.1991.tb00590.x.

Li, B., & Liu, B. (2012). A variance-ratio test of random walk in international Market. Journal of Business Finance and Accounting, 29 (9 &10;), 1275-1299.

Ljung, G.M., & Box, G.E.P. (1978). On a measure of lack of fit in time series models. Biometrika, 65 (2), 297-303.

Moore, A. (1964). A statistical analysis of common-stock prices (Unpublished Ph.D. Dissertation). Graduate School of Business, University of Chicago, Chicago.

Osborne, M.F.M. (1959). Brownian motion in the stock market. Operations Research, 7(2), 145-173.

Poshakwale, S. (1996). Evidence on weak form efficiency and day of the week effect in the Indian stock market. Finance India, 10 (3), 605-616.

Urrutia, J. L. (1995). Test of random walk and market efficiency for Latin American emerging equity markets. The Journal of Financial Research, 18 (3), 299-309.

Vekatesan, K. (2010). Testing random walk hypothesis of Indian stock market returns: Evidence from National Stock Exchange (pp. 1-10). ICBI-University of Kelaniya, Sri Lanka.

Worthington, A. C., & Higgs, H. (2003). Weak-form market efficiency in European emerging and developed stock markets (Discussion Paper No 159). School of Economics and Finance, Queensland University of Technology, Australia.