An Empirical Test of Weak Form Market Efficiency on an Emerging Market: Evidence from Dhaka Stock Exchange

Abstract

Efficient Market Hypothesis is the cornerstone of modern financial theories. As the tests of market efficiency firstly started from developed markets, the studies on these markets are more in numbers compared with that of on emerging markets. Dhaka Stock Exchange (DSE) is an emerging market of South Asia. The current study has tested this market against weak form market efficiency by using a set of Parametric (serial correlation coefficient test, unit root test, ARIMA) and Non-parametric tests (runs test, Kolmogorov Smirnov test, Shapiro Wilk test) on DGEN and DSE 20 index (two indices of DSE) for the period of 2002-2010 and has concluded that the market is not weak form efficient.

Keywords: Dhaka Stock Exchange, Efficient Market Hypothesis, Parametric tests, Non-parametric tests.

JEL Classification: G14