A STUDY ON TESTING WEAK-FORM EFFICIENT MARKET HYPOTHESIS OF ASIAN MARKETS

Abstract

Stock markets are unpredictable and it is hard to find complete information about the stocks and market. If the markets are efficient and current prices reflect complete information then buying and selling stock is an attempt to outperform the market. The efficient market hypothesis states that at any given time, securities reflect complete information based on the various factor such as company discloser, company announcements, dividend, policy of the company, company fundamentals and change in government policies, etc. The purpose of this study is to test the weak form of market efficiency of selected Asian stock markets. We have taken daily closing price of five stock markets BSE, SSE, TSE, KRX and HKEX under the study from the period -1st January 2005 to 31st March 2016 and have applied various test like Runs Test, K-S Test, Sign Test, Auto Correlation, Unit Root test and Monte Carlo simulation for Brownian motion. These modern tests helps in finding relationship between the future stock prices and their past performance through Efficient Market Hypothesis. The overall results from the empirical analysis suggest that the stock markets under study are weak-form efficient.