Essay on Weak Form Efficiency Test of Dse

7741 Words Sep 12th, 2015 31 Pages
Weak- Form Market Efficiency of Dhaka Stock Exchange (DSE),
Bangladesh

ABU TAHER MOLLIK
Economics & Finance,
Regional School of Business,
Faculty of Law and Management,
La-Trobe University, Bendigo,
VIC 3550, Australia.
Email:abumollik@yahoo.com.au; a.mollik@latrobe.edu.au

M KHOKAN BEPARI
PhD Student
School of Commerce and Marketing
Faculty of Arts, Business, Informatics and Education
Central Queensland University, Australia
Email: k.bepari@cqu.edu.au; khokan552@yahoo.com
Phone:+610402917968

Weak Form Market Efficiency of Dhaka Stock Exchange (DSE),
Bangladesh

Abstract
This paper examines the weak-form efficiency in Dhaka Stock Exchange (DSE) of
Bangladesh adjusting for thin trading problem. Both non-parametric
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The implication of stock market efficiency is that in an efficient market future stock prices cannot be predicted using any past, present or future information and hence no strategy can be formulated to make abnormal profit based on past prices. In an efficient market, security prices follow a ‘random walk’ meaning that period-to-period price changes should be statistically independent. The early works to test the random walk were conducted by
Fama (1965) and Samuelson (1965), in which they concluded that most of the evidence seems to have been consistent with the efficient market hypothesis (EMH). Other studies in the US with similar findings include those of Sharpe (1966), Friend et al. (1970), and Williamson (1972).

Although the EMH is divided into three forms of efficiency depending on the information set to which share prices adjust, it is usually believed that the markets in developing and less developed countries are not efficient in semi-strong form or strong form and so it is very much convenient to test the weak-form of efficiency in such type of a market. Significant levels of inefficiency have been found in developing and emerging markets in Asia, Europe, Latin America and Africa (See, for instance, Whorington and Higgs , 2005, 2003a&b, Simons & Laryea, 2005 ). Inefficiency has

also been found in markets such as Singapore, India, Nigeria, Mauritius and Greece and Ghana, among others; the inefficiency

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