Testing weak form efficiency of capital markets: A case of Pakistan

2014 IJRSM – Volume 3 Issue 1


Rehman, Sania
National Defence University, Islamabad, Pakistan (maliks_88@hotmail.com)

Qamar, Muhammad Rizwan*
National Defence University, Islamabad, Pakistan (mrrizwanqamar@gmail.com)


Efficient Market Hypothesis has attracted considerable attentions from researchers of all over the world. A large number of studies have already been conducted by the researchers and a lot of importance has given to the emerging markets. Different studies give different outcomes on market efficiency of the emerging markets. To institute a more perfect conclusion about Market Efficiency in Pakistani financial markets this study is conducted on the major Stock Market of Pakistan such as the Karachi Stock Exchange. Three econometric tests have applied on the daily data of KSE-100 index for two years from 2009 and 2010 including the famous Runs Test, Autocorrelation Function (ACF) test and the Augmented Dickey-Fuller (Unit Root) test. Different tests are applied to form a distinctive opinion on the Weak Form Efficiency of the KSE. The results of this study revealed that there exists a positive correlation in the KSE 100-index. The runs test gives zero p-value which shows continues growing trend. This illustrate that the performance of the market is inefficient. The similar results have been shown in the previous studies on the KSE.

Keywords: autocorrelation; runs test; unit root test; efficient market hypothesis; random walk theory


DOI: https://doi.org/10.5861/ijrsm.2014.634

*Corresponding Author