Testing of Weak Form of Efficient Market Hypothesis: Evidence from the Bahrain Bourse

Investment Management and Financial Innovations” August 2017, Vol. 14, No. 2-2, pp. 376-385. DOI http://dx.doi.org/10.21511/imfi.14(2-2).2017.09.

11 Pages Posted: 2 Jan 2020

See all articles by Iqbal Thonse Hawaldar

Iqbal Thonse Hawaldar

Kingdom University

Babitha Rohith

affiliation not provided to SSRN

Prakash Pinto

affiliation not provided to SSRN

Date Written: August 16, 2017

Abstract

Efficient market hypothesis (EMH) states that financial markets are “informationally efficient”, implying that current prices fully reflect all available information. The present study aims at testing the weak form of market efficiency of the individual stocks listed on the Bahrain Bourse for the period 2011 to 2015. Weak form of EMH is tested using the Kolmogorov-Smirnov goodness of fit test, run test and autocorrelation test. The K-S test result concludes that in general the stock price movement does not follow random walk. The results of the runs test reveals that share prices of seven companies do not follow random walk. Autocorrelation tests reveal that share prices exhibit low to moderate correlation varying from negative to positive values. As the study shows mixed results, it is difficult to conclude the weak form of efficiency of Bahrain Bourse.

Keywords: random walk, efficient market hypothesis, run test, autocorrelation test

JEL Classification: G100, G140

Suggested Citation

Hawaldar, Iqbal Thonse and Rohith, Babitha and Pinto, Prakash, Testing of Weak Form of Efficient Market Hypothesis: Evidence from the Bahrain Bourse (August 16, 2017). Investment Management and Financial Innovations” August 2017, Vol. 14, No. 2-2, pp. 376-385. DOI http://dx.doi.org/10.21511/imfi.14(2-2).2017.09. , Available at SSRN: https://ssrn.com/abstract=3504485 or http://dx.doi.org/10.2139/ssrn.3504485

Iqbal Thonse Hawaldar (Contact Author)

Kingdom University ( email )

Sanad
Bahrain

Babitha Rohith

affiliation not provided to SSRN

Prakash Pinto

affiliation not provided to SSRN

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