Investment Strategies and Random Walk Hypothesis: South Asia

The paper aims to study the weak form efficiency of South Asian stock market from 2015 to 2018 in the form of random walk by considered daily closing prices of DSE, Nifty 50, MASIX, NEPSE, KSE-100 and CSE All Share indices from April 1, 2015 to March 31, 2018. Both parametric and nonparametric tests...

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Bibliographic Details
Published in:SCMS journal of Indian management 2020-10, Vol.17 (4), p.13-29
Main Author: Gahlot, Ruchika
Format: Article
Language:English
Subjects:
Abnormal returns
Capital markets
Efficiency
Efficient markets
Hypotheses
Investments
Macroeconomics
Profits
Random walk theory
Securities markets
Stock exchanges
Stock prices
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Summary:The paper aims to study the weak form efficiency of South Asian stock market from 2015 to 2018 in the form of random walk by considered daily closing prices of DSE, Nifty 50, MASIX, NEPSE, KSE-100 and CSE All Share indices from April 1, 2015 to March 31, 2018. Both parametric and nonparametric tests ("ex-posts" in nature) are applied for testing weak-form efficiency. The parametric tests include ADF unit root test, auto correlation function and Variance ratio test while non parametric tests include PP unit root test, kolmogrov-Smirnov Goodness of test and run test. The results suggested that all south Asian stock market are inefficient in weak form except India and Maldives. It means that investors will be able to consistently earn abnormal gains by analyzing the historical prices in Nepal, Pakistan, Bangladesh and Sri Lanka. The study will help investors to create and manage an investment portfolio in these South Asian countries as inefficiency in market can lead to abnormal profits to them.
ISSN:0973-3167