Weak Form Market Efficiency: Evidence from Developing and Emerging Markets”

Authors

  • Ume Salma Akbar Assistant Professor at Sukkur IBA University Sukkur, Sindh, Pakistan. Author
  • Niaz Ahmed Bhutto Professor, Sukkur IBA University, Sukkur Sindh, Pakistan. Author

Keywords:

Efficient Market Hypothesis, Unit Root Test, GARCH (1,1), Variance Test Ratio

Abstract

This paper attempts to investigate the weak form of market efficiency in developing empirically and emerging countries' capital markets including” (India, China, Pakistan, Malaysia Philippines and Indonesia) Couple of studies has been conducted internationally to find out market efficiency and its form in several countries by multiple authors through different methodologies yet a gap exists to search central and East Asian countries on one platform. The panel data consists of the time series data of six Asian countries. Data has been obtained from Bloomsburg database from January 2009 to December 2019. By utilizing unit root test, GARCH (1, 1) model and variance test ratio. The results show no evidence of the weak form of efficiency in sample countries. Similar sort of studies has been conducted globally for testing efficient market hypothesis this is a very first time that developing and emerging countries of Asia are being taken.”

https://doi.org/10.5281/zenodo.10498037

References

Ahmed, S. I. (2022). Designing a Qualitative Study on factors that affect the Dhaka Stock Exchange Broad Market Index. AIUB Journal of Business and Economics, 19(1), 193-204.

Appiah-Kusi, J., & Menyah, K. (2003). Return Predictability in African Stock Markets. Review of Financial Economics, Vol.12, 247 -270.

Bollerslev, T. (1986). Generalized Autoregressive Conditional Heteroscedasticity. Journal of Econometrics, pp.307-327.

Buguka, Cumhur and Brorsen, B. Wade (2003). Testing Weak-Form Market Efficiency: Evidence from the Istanbul Stock Exchange. International Review of Financial Analysis, Vol. 12, pp. 579–590.

Butler, C. K., & Malaikah, S. J. (1992). Efficiency and Inefficiency in Thinly Traded Stock Markets: Kuwait and Saudi Arabia. Journal of Banking and Finance, Vol.16, 197-210.

Chan, K. C., Gup, B. E., & Pan, M. S. (1997). International Stock Market Efficiency and Integration: A Study of Eighteen Nations. Journal of Business Finance and Accounting, Vol.26, No.6.

Cheng, Sheng. S., and Lee, Hwey. C., (2006). Weak Form Market Efficiency Hypothesis Testing – A Price Asymmetry Viewpoint, The Journal of Global Business Management, Vol.2, No.2.

Choudhry, T. (1994). Stochastic Trends and Stock Prices: An International Inquiry. Applied Financial Economics, Vol.4, 383-390.

Cooray, A., & Wickremasinghe, G. (2005). The Efficiency of Emerging Stock Market: Empirical Evidence from the South Asian Region. Discussion Paper Series, No.2, School of Economics, UTAS , 1-15.

Dakhan, S. A., Sohu, J. M., Jabeen, A., Mirani, M. A., Shaikh, J. A., & Iqbal, S. (2020). Impact of Green HRM on Employees Pro-Environmental Behavior: Mediating Role of Women Environmental Knowledge at Higher Education Institutions. IJCSNS International Journal of Computer Science and Network Security, 20(12), 202–208. https://doi.org/10.22937/IJCSNS.2020.20.12.22

Dakhan, S. A., Sohu, J. M., Mustafa, S., & Sohu, S. A. (2021). Factors Influencing Political Orientation: Mediating Role of Women Empowerment. International Journal of Management (IJM), 12(1), 786–795. https://doi.org/10.34218/IJM.12.1.2021.069

Darrat, A. F., and Zhang, M. (2000). On Testing the Random Walk Hypothesis: A Model Comparison Approach, The Financial Review, Vo.35, pp.105-124.

Datar, M. K. and Basu, P. K., (2004). Financial sector reforms in India: Some Institutional Imbalances, Conference Volume, Academy of World Business, Marketing and Management Development Conference, Gold Coast, Australia, July.

Dickey, D. A. and Fuller, W. A. (1979). Autoregressive Time Series with a Unit Root, Journal of the American Statistical Association, Vol.74, pp.427–431.

Fama, E. F. (1965). The Behaviour of Stock Market Prices. Journal of Business, Vol.38, 34-105.

Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, Vol.25, 383-417.

Garg, V. and Jain, Priya (2009). Efficient Market Hypothesis: A Critical Review of Theory and its Implications for Investment Decision. Manglmay Journal of Management and Technology, Vol.3, Issue 2.

Gupta, R., & Basu, P. K. (2007). Weak Form Efficiency in Indian Stock Markets. IBER Journal, Vol.6, No.3, 57-64.

Hamid, K., Suleman, M. T., Shah, S. Z. A., and Akash, R. S. I. (2010). Testing the Weak form of Efficient Market Hypothesis: Empirical Evidence from Asia-Pacific Markets. International Research Journal of Finance and Economics, Issue 58, pp.121-

Huang, B. N. (1995). Do Asian Stock Markets Follow Random Walks: Evidence from the Variance Ratio Test. Applied Financial Economics, Vol.5, No.4, 251-256.

Iqbal, S., Akhtar, S., Anwar, F., Kayani, A. J., Sohu, J. M., & Khan, A. S. (2021). Linking green innovation performance and green innovative human resource practices in SMEs; a moderation and mediation analysis using PLS-SEM. Current Psychology, 0123456789. https://doi.org/10.1007/s12144-021-02403-1

Iqbal, S., Hong Yun, T., Akhtar, S., & Sohu, J. M. (2019). Impacts of Performance-based Pay on Employee Productivity; Mediated by Employee Training. International Journal of Research & Review (Www.Ijrrjournal.Com) Vol, 6(10), 235–241. https://www.ijrrjournal.com/IJRR_Vol.6_Issue.10_Oct2019/IJRR0032.pdf

Junejo, I., Sohu, J. M., Aijaz, A., Ghumro, T. H., Shaikh, S. H., & Seelro, A. D. (2022). The Mediating Role of Brand Attitude for Purchase Intention: Empirical Evidence from Fast Food Industry in Pakistan. ETIKONOMI, 21(1), 103–112. https://doi.org/10.15408/etk.v21i1.22302

Junejo, I., Sohu, J. M., Ali, S. H., Qureshi, S., & Shaikh, S. A. (2020). A Study of Consumer Attitude Towards Counterfeit Fashion Luxurious Products: The Mediating role of Purchase Intension. Sukkur IBA Journal of Management and Business, 7(1), 1. https://doi.org/10.30537/sijmb.v7i1.472

Karemera, D., Ojah, K., & Cole, J. A. (1999). Random Walks and Market Efficiency Tests: Evidence from Emerging Equity Markets. Review of Quantitative Finance and Accounting, Vol.13, No.2, 171-188.

Laurence, M. M. (1986). weak-form Efficiency in the Kuala Lumpur and Singapore Stock Markets. Journal of Banking and Finance, Vol.10, 431-445.

Lee, U. (1992). Do Stock prices Follow Random Walk? Some International Evidence. International Review of Economics and Finance, Vol.1, No.4, 315-327.

Malkiel, B. G., (2003). The Efficient Market Hypothesis and its Critics, CEPS Working Paper No.91, pp. 1-47.

Mishra, P. K. (2009). Indian Capital Market - Revisiting Market Efficiency. Indian Journal of Capital Market, Vol. II, No. 5, pp. 30-34.

Mishra, P. K., and B. B. Pradhan (2009). Capital Market Efficiency and Financial Innovation – A Prospective Analysis. The Research Network, Vol.4, No. 1, pp. 1-5

Naveed, H. M., Hongyun, T., Memon, B. A., Ali, S., Alhussam, M. I., & Sohu, J. M. (2023). Artificial neural network (ANN)-based estimation of the influence of COVID-19 pandemic on dynamic and emerging financial markets. Technological Forecasting and Social Change, 190. https://doi.org/10.1016/j.techfore.2023.122470

Ojah, K., & Karemera, d. (1999). Random Walk and Market Efficiency Test of Latin American Emerging Equity Markets: a Revisit. The Financial Review, Vol.34, No.2, 57-72.

Pant, B., & Bishnoi, T. R. (2002). Testing Random Walk Hypothesis for Indian Stock Market Indices. Working Paper series, Indian Institute of Management, Ahmadabad.

Parkinson, J. M. (1987). The EMH and CAPM on Nairobi Stock Exchange. East Africa Economic Review, Vol.3, No.2, 105-110.

Phillip, P.C.B. and Perron, P. (1988). Testing for a Unit Root in Time Series Regression, Biometrika, Vol.75, pp.335-346.

Poshakwale, S. (1996). Evidence on weak Form Efficiency and Day of the Week effect in the Indian Stock Market. Finance India, Vol.10, No.3, 605-616.

Qalati, S. A., Ahmed, N., Mei, J., Thu, T. T. H., & Sohu, J. M. (2020). Stay Home Stay Safe: General Public Knowledge, Attitude and Behavior Regarding Covid-19 During the Lockdown in Developing Countries. International Journal of Humanities, Arts and Social Sciences, 6(2), 69–77. https://doi.org/10.20469/ijhss.6.20002-2

Qalati, S. A., Li, W., Mirani, S. H., Sohu, J. M., Hussain, R. Y., & Ahmed, N. (2020). The Antecedents of Green Consumer Behavior the Mediating Role of Brand Image in the Cosmetic Industry. Sukkur IBA Journal of Management and Business, 7(1), 19. https://doi.org/10.30537/sijmb.v7i1.527

Qalati, S. A., Ostic, D., Fan, M., Dakhan, S. A., Vela, E. G., Zufar, Z., Sohu, J. M., Mei, J., & Thuy, T. T. H. (2021). The General Public Knowledge, Attitude, and Practices Regarding COVID-19 During the Lockdown in Asian Developing Countries. International Quarterly of Community Health Education, 41(3), 0272684X2110049. https://doi.org/10.1177/0272684X211004945

Ramasastri, A. S., (1999). Market efficiency in the Nineties: Testing through Unit Roots Prajanan, Vol.XXVIII, No.2, pp.155-161

Rutterford, J. (1993). Introduction to Stock Exchange Investment, Second Edition, pp.281-308, The Macmillan Press Ltd., London.

Samuel, S. E., and Oka, R. U. (2010). The efficiency of the Nigerian Capital Market: Implications for Investment Analysis and Performance. Transnational Corporations Review, Vol. 2, No. 1, pp.42-51

Shah, S. M. M., Sohu, J. M., Dakhan, S. A., Ali, R. S., Junejo, I., & Chouhan, I. M. (2021). The Reinvesting Impact of Promotional Activity and Store Atmosphere on Impulse Buying Behavior: The Mediating Role of Payment Facility. TEM Journal, 10(1), 221–225. https://doi.org/10.18421/TEM101-28

Sohu, J. M., Junejo, I., & Hussain, F. (2019). The Impact of Corruption on Exchange Eate: Empirical Evidence from Panel Data. Sukkur IBA Journal of Management and Business, 6(1), 34. https://doi.org/10.30537/sijmb.v6i1.264

Sohu, J. M., Tian, H., Rahoo, L. A., Dakhan, S. A., Soomro, H. A., & Naveed, H. M. (2020). Feasibility Study of Knowledge Management Establishment in Private Degree Awarding Institute of Pakistan. IJCSNS International Journal of Computer Science and Network Security, 20(12), 177–183. https://doi.org/10.22937/IJCSNS.2020.20.12.19

Srinivasan, R. (1993). Securities Prices Behaviour Associated with Rights Issue-Related Events. Doctoral Dissertation, Indian Institute of Management, Ahmedabad.

Srivastava, S. P., and Thenmozhi, M., (2011). A Study of Market efficiency of stock Markets in Emerging and Developed Economies, Paper presented in 8th AIMS International Conference on Management, January 1-4, Conference Volume, pp.674-682.

Sohu, J. M., Junejo, I., Khuwaja, F. M., Qureshi, N. A., & Dakhan, S. A. (2022). The Impact of Entrepreneurial Education on Entrepreneurial Intention During the COVID-19 Pandemic: An Empirical Study from Pakistan. Sarfraz Ahmed DAKHAN / Journal of Asian Finance, 9(3), 95–0103.

Sohu, J. M., Mirani, M. A., Dakhan, S. A., & Junejo, I. (2020). Factors Influencing on Succession Planning: Evidence from Service Sector of Pakistan. International Journal of Management (IJM, 11(12), 2629–2636. https://doi.org/10.34218/IJM.11.12.2020.247

Sudhahar, J. C., and Raja, M., (2010). An Empirical Assessment of Indian Stock Market Efficiency, Karunya Journal of Research, Vol.2, No.1, pp.100-112.

Vaidyanathan, R., & Gali, K. K. (1994). Efficiency of the Indian Capital Market. Indian Journal of Finance and Research , Vol.5, No.2.

Wen, Xianming, Li, Kexi, and Liang, Lin, (2010). A Weak-Form Efficiency Testing of China‟s Stock Markets. Third International Joint Conference on Computational Science and Optimization, May, pp.514-517.

Worthington, A. C. and Higgs, H., (2003). Tests of Random Walks and Market Efficiency in Latin American Stock Markets: An Empirical Note. School of Economics and Finance, Queensland University of Technology in its Series School of Economics and Finance Discussion Papers and Working Papers Series No. 157.Worthington,

Worthington, A. C. and Higgs, H., (2004). Random Walks and Market Efficiency in European Equity Markets, Global Journal of Finance and Economics, Vol. 1, No. 1, pp. 59-78.

Worthington, A. C., & Higgs, H. (2006). Evaluating Financial Development in Emerging Capital Markets with efficiency Benchmarks. Journal of Economic Development, Vol.31, No.1, pp.1-27

Downloads

Published

2023-09-30

How to Cite

Weak Form Market Efficiency: Evidence from Developing and Emerging Markets”. (2023). International Research Journal of Management and Social Sciences, 4(3), 211-224. https://irjmss.com/index.php/irjmss/article/view/19

Similar Articles

1-10 of 78

You may also start an advanced similarity search for this article.