scholarly journals Testing the Random Walk Theory in the Nigerian Stock Market

2017 ◽  
Vol 6 (3) ◽  
pp. 500 ◽  
Author(s):  
Clement C. M. Ajekwe ◽  
Adzor Ibiamke ◽  
Habila Abel Haruna
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Weak Form ◽  
Foreign Investors ◽  
Long Time ◽  
Random Walk Theory ◽  
Daily Stock Returns ◽  
Daily Returns

<div><p><em>This study tests the random walk theory in the Nigerian stock market by analyzing whether stock returns follow a random walk distribution. </em><em>The study employs the daily returns of the Top 20 most performing stocks on the NSE for the period January 1<sup>st</sup> 2010 to December 31<sup>st</sup> 2014. Autocorrelation and runs test</em><em> were employed for hypothesis testing.  </em><em>Based on our analysis, we found that the daily stock returns of the 20 most active stocks on the Nigerian stock market are randomly distributed indicating that Nigerian Stock market is informational efficient at the weak form level. </em><em>The implication of the finding is that no one can fool the market consistently for a long time by trading on the basis of past information such as historical stock prices. The study recommends that more efforts should be made to reposition the market to attract more investible funds from domestic and foreign investors.</em></p></div>

scholarly journals NOISE TRADER RISK: EVIDENCE FROM VIETNAM STOCK MARKET

2019 ◽  
Vol 128 (5C) ◽  
pp. 5
Author(s):  
Phan Khoa Cuong ◽  
Tran Thi Bich Ngoc ◽  
Bui Thanh Cong ◽  
Vo Thi Quynh Chau
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Positive Impact ◽  
Moving Average ◽  
Noise Trader ◽  
Daily Stock Returns ◽  
Fundamental Value ◽  
The Impact ◽  
Daily Returns

<p><strong>Abstract: </strong>This paper investigates the existence of noise trader risk in Vietnam’s stock market and its effect on the daily returns of stock prices. The methodologies contain the estimation of GARCH (1,1) model to filter the residuals using the moving average method to calculate the impact of information traders. Noise trader risk or the risk that is caused by noise traders is derived by subtracting the residuals by the rational traders’ impact. We find that the noise trader risk does exist in Vietnam’s stock market and its impact on daily returns of stocks is unpredictable. Meanwhile, we find a positive impact of information traders on the stock returns. It increases the daily stock returns, and in turn, helps the market to correct itself because the stock prices move back to its fundamental value.</p><p><strong>Keywords</strong>: noise trader risk, GARCH (1,1), Vietnam’s stock market</p>

scholarly journals Random Walk Hypothesis for Stock Prices in Fiji

2021 ◽  
Vol 13 (2) ◽  
pp. 79-88
Author(s):  
Janesh Sami
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Unit Root ◽  
Stock Prices ◽  
Structural Break ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Random Walk Hypothesis ◽  
Augmented Dickey Fuller ◽  
Historical Movement

The main goal of this paper is to investigate the random walk hypothesis in Fiji using monthly data from January 2000 to October 2017. Applying augmented Dickey Fuller (ADF 1979, 1981) and Phillips-Perron (1988), Zivot-Andrews (1992), and Narayan and Popp (2010) unit root tests, this study finds that stock prices is best characterized as non-stationary. The estimated multiple structural break dates in the stock prices corresponds with devaluation of Fijian dollar by 20 percent in 2009 and General Elections in September 2014, which Fiji First Party won by majority votes. The empirical results indicate that stock prices are best characterized as a unit root (random walk) process, indicating that the weak-form efficient market hypothesis holds in Fiji’s stock market. Hence, it will be difficult to predict future returns based on historical movement of stock prices in Fiji’s stock market.

scholarly journals Testing Weak-Form Market Efficiency of Dhaka Stock Exchange

2015 ◽  
Vol 4 (2) ◽  
pp. 79-90
Author(s):  
Md.‬ Abu Hasan‬‬‬‬‬‬‬‬
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Stock Prices ◽  
Stock Exchange ◽  
Weak Form ◽  
Jel Classification ◽  
Ratio Test ◽  
Daily Return ◽  
Classification Code ◽  
Augmented Dickey Fuller

Measuring the efficiency of the stock market is an important research topic as there are various implications for investors. This paper investigates the weak form efficiency in the framework of the random walk hypothesis for the stock market in Bangladesh, employing both Non Parametric tests (Runs test and Phillips-Perron test) and Parametric tests (Autocorrelation test, Augmented Dickey-fuller test, and Variance Ratio test). The study uses daily return data for the three stock indices of Dhaka Stock Exchange such as DSI (from 02 January 1993 to 27 January 2013) with a total of 4823 daily return observations, DGEN (from 01 January 2002 to 31 July 2013) with a total of 2903 daily return observations, and DSE-20 (from 01 January 2001 to 27 January 2013) with a total of 3047 daily return observations. The evidence suggests that all the return series do not follow the random walk model, and thus the Dhaka Stock Exchange is inefficient in weak form. Thus, historical stock prices can be used to achieve superior gains from the stock markets in Bangladesh. JEL Classification Code: C22, G10, G14

Trading Volume and Cross-Autocorrelations of Stock Returns in Emerging Markets: Evidence from the Taiwan Stock Market

2004 ◽  
Vol 07 (04) ◽  
pp. 509-524
Author(s):  
Wen-Hsiu Kuo ◽  
Hsinan Hsu ◽  
Chwan-Yi Chiang
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Trading Volume ◽  
Price Limits ◽  
Speed Of Adjustment ◽  
New Information ◽  
Weak Evidence ◽  
Market Inefficiency ◽  
Daily Returns

This study empirically investigates the interaction between trading volume and cross-autocorrelations of stock returns in the Taiwan stock market. The result shows that returns on high trading volume portfolios lead returns on low trading volume portfolios when controlled for firm size, indicating that trading volume determines lead-lag cross-autocorrelations of stock returns. Overall, the empirical findings of this study demonstrate similar results for both monthly and daily returns, suggesting that nonsynchronrous trading is not the main reason for the lead-lag cross-autocorrelations presented in this study. Consequently, the empirical results presented here support the speed of adjustment hypothesis, and suggest that some market inefficiency exists in the Taiwan stock market. Additionally, compared with evidence of lead-lag cross-autocorrelations in the larger, less regulated US stock market, as examined by Chordia and Swaminathan (2000), Taiwan stock market displays less evidence of VARs and Dimson beta regressions. We conjecture that this weak evidence may result from the regulations limiting daily price movements in the Taiwan stock market. Although the price limits policy lowers risk and stabilizes stock prices, it also prevents stock prices and trading volume from instantaneously and fully reflecting new information.

scholarly journals Weak Form Efficiency of the Amman Stock Exchange: An Empirical Analysis (2000-2013)

2015 ◽  
Vol 11 (1) ◽  
pp. 173 ◽  
Author(s):  
Izz eddien N. Ananzeh
Keyword(s):  
Financial Markets ◽  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Final Conclusion ◽  
Clear Cut ◽  
Amman Stock Exchange ◽  
Daily Returns

<p>The Efficient Market Hypothesis (EMH) has been a lot of debates in the literature of finance because of its important implication, and there is no clear-cut case regarding the efficiency of the financial markets for both developed and emerging markets. This empirical study conducted to examine EMH at the weak form level of Amman stock Exchange (ASE) by using daily observations for the period span from 2000 to 2013. Recent econometric procedures utilized for testing the randomness of stock prices for ASE. The results of serial correlation reject the existence of random walks in daily returns of the ASE, and the unit root tests also conclude the return series of ASE are stationary and inefficient at the weak-level. Also the runs tests verify that the stock returns series on ASE are not random, and our final conclusion reports that the ASE is inefficient at the weak form level. </p>

scholarly journals Behaviour of Stock Returns in the KLSE: A Test of the Random Walk Hypothesis

2020 ◽  
Author(s):  
Ahmadu Umaru Sanda ◽  
Abdul Ghani Shafie ◽  
G.S Gupta
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Stock Returns ◽  
Stock Exchange ◽  
Technical Analysis ◽  
Kuala Lumpur ◽  
Random Walk Hypothesis ◽  
Serial Correlations ◽  
Random Walk Theory

A sample of 224 companies listed in the Kuala Lumpur Stock Exchange was taken for the period 1991-96. The serial correlations tests of varying lags and the runs tests were employed to test for the random walk theory. The bulk of the results tilts towards the rejection of non-randomness, lending weight to the argument that the stock market has no memory, and casting doubt upon the usefulness of technical analysis.  

scholarly journals The Random Walk Theory And Stock Prices: Evidence From Johannesburg Stock Exchange

2014 ◽  
Vol 13 (6) ◽  
pp. 1241 ◽  
Author(s):  
Tafadzwa T. Chitenderu ◽  
Andrew Maredza ◽  
Kin Sibanda
Keyword(s):  
Random Walk ◽  
Stock Prices ◽  
Stock Exchange ◽  
Arima Model ◽  
Weak Form ◽  
Ratio Test ◽  
Random Walk Process ◽  
Random Walk Hypothesis ◽  
Johannesburg Stock Exchange ◽  
Random Walk Theory

In this paper, we test the Johannesburg Stock Exchange market for the existence of the random walk hypothesis using monthly time series of the All Share Index (ALSI) covering the period 2000 2011. Traditional methods, such as unit root tests and autocorrelation test, were employed first and they all confirmed that during the period under consideration, the JSE price index followed the random walk process. In addition, the ARIMA model was constructed and it was found that the ARIMA (1, 1, 1) was the model that most excellently fitted the data in question. Furthermore, residual tests were performed to determine whether the residuals of the estimated equation followed a random walk process in the series. The authors found that the ALSI resembles a series that follow random walk hypothesis with strong evidence of a wide variance between forecasted and actual values, indicating little or no forecasting strength in the series. To further validate the findings in this research, the variance ratio test was conducted under heteroscedasticity and resulted in non-rejection of the random walk hypothesis. It was concluded that since the returns follow the random walk hypothesis, it can be said that JSE, in terms of efficiency, is on the weak form level and therefore opportunities of making excess returns based on out-performing the market is ruled out and is merely a game of chance.

scholarly journals A Test of Return Predictability in the Vietnamese Stock Market

2020 ◽  
Vol 11 (2) ◽  
pp. 390
Author(s):  
Thanh Trung Le ◽  
Anh Tram Luong
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Stock Prices ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Return Predictability ◽  
Emerging Countries ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
First Time

For the first time, the market efficiency is examined in the different context of the stock market. By employing tests of weak-form efficiency, this study finds out that the overall, Vietnamese stock market does not follow a random walk regardless of the degree of stock market volatility. Therefore, technical analysis could be used by investors and financial managers to forecast price and gain profits on the market. Another finding is that although the Vietnamese market is not weak-form efficient, there is an improvement in recent years. The paper suggests that if investors and financial managers can employ past returns to predict stock prices and make decisions on the Vietnamese market, they should change their strategies in the future. This finding also contributes to studies on the Efficient Market Hypothesis in emerging countries and its performance in different economic contexts.

scholarly journals DAILY VARIATION AND PREDICTING STOCK MARKET RETURNS FOR THE FRANKFURTER BÖRSE (STOCK MARKET)

2008 ◽  
Vol 9 (3) ◽  
pp. 189-198 ◽  
Author(s):  
Jeffrey E. Jarrett ◽  
Janne Schilling
Keyword(s):  
Time Series ◽  
Stock Market ◽  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Arima Model ◽  
Unit Root Test ◽  
Unit Roots ◽  
Stock Market Returns ◽  
Daily Stock Returns

In this article we test the random walk hypothesis in the German daily stock prices by means of a unit root test and the development of an ARIMA model for prediction. The results show that the time series of daily stock returns for a stratified random sample of German firms listed on the stock exchange of Frankfurt exhibit unit roots. Also, we find that one may predict changes in the returns to these listed stocks. These time series exhibit properties which are forecast able and provide the intelligent data analysts’ methods to better predict the directive of individual stock returns for listed German firms. The results of this study, though different from most other studies of other stock markets, indicate the Frankfurt stock market behaves in similar ways to North American, other European and Asian markets previously studied in the same manner.

scholarly journals Testing Weak Form of Market Efficiency in Nepal

2016 ◽  
Vol 1 ◽  
Author(s):  
Jeetendra Dangol
Keyword(s):  
Random Walk ◽  
Stock Market ◽  
Market Efficiency ◽  
Stock Returns ◽  
Weak Form ◽  
Corrected Data ◽  
Infrequent Trading ◽  
Normally Distributed

The paper investigates the weak form of market efficiency for overall and sectorial indices. The Nepalese stock returns are found not being normally distributed during the study period. The autocorrelation of the stock returns was reduced by correcting the data with the application of the methodology suggested by Miller et al. (1994). The Nepalese stock market has suffered from the problem of thin-trading. Overall, the Nepalese market is not weak-form efficient on the basis of the analysis performed by employing observed returns series; but it is found a weak-form efficient in case of the analysis while using corrected data after adjusting infrequent trading. Hence, the study is supported to the random-walk and weak form of market efficiency.

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