Testing Market Efficiency: Empirical Evidence from Developed Markets of Asia Pacific

34 Pages Posted: 25 Jan 2012  

Saqib Nisar

FAST School of Business- National University of Computer & Emerging Sciences (NUCES)

Muhammad Hanif

Bahria University - Accounting-Finance Department

Date Written: January 12, 2012

Abstract

According to efficient market hypothesis (EMH) the prices of stock should reflect all available information in the market and no investor is able to earn excess return on the basis of some secretly held private, public or historical information. Efficient market hypothesis (EMH) can be further divided into three sub hypotheses depending upon the information set involved and these are weak form efficient market hypothesis, semi strong form efficient market hypothesis and strong form efficient market hypothesis. This study has examined the weak form of efficiency on the seven major stock exchanges that are present in Asia-Pacific including Nikke N225 (Japan), Shanghai Composite (China), Kospi Composite (Korea), Hang Seng Index HIS (Hong Kong), All Ordinaries ASX (Australia), KSE-100 (Pakistan) and BSE SENEX (India). Historical index values were gathered on a monthly, weekly and daily basis for a period of 14 Years (July 1997 to June 2011). We have applied two statistical tests including runs test, and variance ratio test. It is found in the process that three out of seven developed stock markets of Asia Pacific doesn’t follow Random-walk and hence Nikke N225, Kospi Composite, Hang Seng Index HIS and All Ordinaries ASX stock exchanges are the weak form of efficient markets.

Keywords: EMH, KSE-100, BSE-SENSEX, Nikke N225, Kospi Composite, Hang Seng Index HIS, All Ordinaries ASX, Random-walk, Weak form of efficient market, Asia Pacific

JEL Classification: G14

Suggested Citation

Nisar, Saqib and Hanif, Muhammad, Testing Market Efficiency: Empirical Evidence from Developed Markets of Asia Pacific (January 12, 2012). Available at SSRN: https://ssrn.com/abstract=1983960 or http://dx.doi.org/10.2139/ssrn.1983960

Saqib Nisar (Contact Author)

FAST School of Business- National University of Computer & Emerging Sciences (NUCES) ( email )

A.K. Brohi Road, Sector H-11/4
Islamabad, Punjab 44000
Pakistan
92-3455267662 (Phone)

Muhammad Hanif

Bahria University - Accounting-Finance Department ( email )

Islamabad
Pakistan
92 9260002 (Phone)

HOME PAGE: http://www.bahria.edu.pk/buic/ms/dr-muhammad-hanif/

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