Are the Emerging Capital Markets Weak Form Efficient? - Evidence from the Model of the Dhaka Stock Exchange

摘要

Efficient Market Hypothesis (EMH) has attracted a considerable number of studies in empirical finance, particularly in determining the market efficiency of an emerging financial market that is Dhaka Stock Exchange (DSE). Conflicting and inconclusive outcomes have been generated by various existing studies in EMH. In addition, efficiency tests in the emerging financial markets are rarely definitive in reaching a conclusion about the issue. This paper recommend a paradigm of non-parametric tests of market efficiency for an emerging stock market, that is DSE, consisting of non-parametric test which is autocorrelation function tests (ACF), to establish a more definitive conclusion about EMH in emerging financial markets. The result of this research using Dhaka Stock Exchange General Index (DGEN) demonstrates that a positive autocorrelation on Dhaka Stock Exchange returns exists particularly in the period of 2001-2013 and DSE doesn't hold weak form of efficiency and not following the Random walk model. The inefficiency of the Dhaka Stock Exchange follows on from the violation of the necessary conditions for an efficient market with a developed financial system and also implies financial markets and institutional imperfections.