Testing Weak Form of Market Efficiency of DSE Based on Random Walk Hypothesis Model: A Parametric Test Approach

Ahmed Raihan Sadat, Md. Emran Hasan


Stock market is one great indicator of any country’s economic condition. Hence, measuring the capital market in different forms has always been a great interest to finance researchers. This paper measures the market efficiency and randomness of Dhaka stock Exchange (DSE) in weak form employing daily observations (return) from two comparatively new ventured indices viz. DS30 and DSEX. Initially, the study tests for normality using Jarque-Bera test of normality and found data series are not normally distributed. Later, some widely used parametric tests were conducted to examine the historic price dependencies or to examine the random walk hypothesis (RWH) of DSE indices. Augmented Dickey-Fuller test (ADF), Autocorrelation function (ACF), and variance ratio test (Lo & MacKinlay) were used and all of the results suggested DSE to be not efficient in weak form. Meaning, prices of DSE do not follow a random walk.

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DOI: https://doi.org/10.5296/ijafr.v9i1.14454


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Copyright (c) 2019 Ahmed Raihan Sadat, Md. Emran Hasan

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International Journal of Accounting and Financial Reporting  ISSN 2162-3082

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