scholarly journals Examining the random walk hypothesis in the Amman stock exchange: An analytical study

Accounting ◽  
2021 ◽  
pp. 137-142
Author(s):  
Samer Fakhri Obeidat ◽  
Laith Akram al-qudah ◽  
Faris Irsheid al kharabsha
Keyword(s):  
Random Walk ◽  
Correlation Coefficient ◽  
Analytical Study ◽  
Stock Exchange ◽  
Pearson Correlation ◽  
Weak Form ◽  
Time Lags ◽  
Spearman Correlation ◽  
Random Walk Hypothesis ◽  
Amman Stock Exchange

The current study aimed to examine the weak-form efficiency of the Amman Stock Exchange using the weekly stock closing prices of shares for the period 2017-2019. In order to achieve the research objective, the study used the time lags that occurred between one and three weeks through the following tests: simple regression, Pearson correlation coefficient, and Spearman correlation coefficient. The study sample consisted of 179 companies. The current study concluded that the weekly stock closing prices of the shares of public joint-stock companies in the Amman Stock Exchange do not follow the Random Walk Hypothesis of prices, and therefore, do not follow the characteristics of a normal distribution. Therefore, the Amman Stock Exchange is inefficient at the weak-form level. Consequently, the lack of randomness in weekly stock closing price movements does not comply with the hypothesis of the first study. Likewise, the lack of independence of the changes in the current weekly stock closing prices from the previous ones also does not correspond to the hypothesis of the second study.

scholarly journals Predictability of Stock Returns on the Dhaka Stock Exchange

The Batuk ◽  
2020 ◽  
Vol 6 (2) ◽  
pp. 87-96
Author(s):  
Yub Raj Dhungana
Keyword(s):  
Random Walk ◽  
Stock Returns ◽  
Stock Exchange ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Daily Basis ◽  
Ratio Test ◽  
Efficient Market ◽  
Random Walk Hypothesis ◽  
Augmented Dickey Fuller

The study examines the predictability of index returns on the Dhaka stock market within the framework of the weak-form efficient market hypothesis using historical daily returns for a period of 1st June, 2014 to 29th May, 2020. The Jarque-Bera statistics test explored the return distribution of Dhaka Stock Exchange is non-normal. The random walk hypothesis (RWH) was tested using autocorrelation test, runs test, unit root tests(Augmented Dickey-Fuller (ADF) and, Phillip-Perron (PP) test) and variance ratio test. The results explored that all tests rejected the random walk hypothesis required by the weak-form efficient market hypothesis. This provides empirical basis to infer that the DSE is inefficient at weak-form and stock return can be predicted. The rejection of the RWH on a daily basis is possibly an indication that the weak-form inefficient characteristic of the DSE is not sensitive to return frequency.

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

2019 ◽  
Vol 9 (1) ◽  
pp. 400
Author(s):  
Ahmed Raihan Sadat ◽  
Md. Emran Hasan
Keyword(s):  
Random Walk ◽  
Market Efficiency ◽  
Stock Exchange ◽  
Weak Form ◽  
Data Series ◽  
Ratio Test ◽  
Random Walk Hypothesis ◽  
Hypothesis Model ◽  
Augmented Dickey Fuller ◽  
Tests For Normality

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.

ON THE VALIDITY OF THE RANDOM WALK HYPOTHESIS APPLIED TO THE DHAKA STOCK EXCHANGE

2004 ◽  
Vol 07 (08) ◽  
pp. 1069-1085 ◽  
Author(s):  
MOHAMMAD S. HASAN
Keyword(s):  
Random Walk ◽  
Stock Returns ◽  
Null Hypothesis ◽  
Stock Exchange ◽  
Statistical Tests ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Testing Procedures ◽  
Random Walk Hypothesis ◽  
Bds Test

This paper employs a battery of statistical tests to examine the random walk variant of the weak-form efficient market hypothesis (EMH) using the daily data of the Dhaka Stock Exchange, the major equity market of Bangladesh, over a period of January 1990 to December 2000. The test results, however, are at variance across testing procedures and sub-periods. Results based on the random walk model and unit root tests show that the null hypothesis of randomness cannot be rejected and stock prices have a significant random walk or permanent component. Our analysis of autocorrelation functions indicates mean-reversion behavior of stock returns in most cases albeit with stock returns exhibiting some memory and predictable components during the bubble and post-speculation periods. The evaluation of the EGARCH-M model suggests significant asymmetric and leverage effects during the sub-period of speculative bubbles of 1996–1997. The BDS test indicates evidence of nonlinear long-term dependence during the pre-speculation period, while during the speculation and post-speculation periods the null hypothesis of nonlinear independence was not rejected. Overall, based on this evidence we do not categorically claim that the Dhaka Stock Exchange is weak-form efficient. However, these findings underscore the predictive significance and relevance of the random walk hypothesis as a generalized theory in explaining movements of share prices.

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 THE EMPIRICS OF WEAK FORM OF EFFICIENT MARKET HYPOTHESIS: EVIDENCE FROM LAC REGION MARKETS

2020 ◽  
Author(s):  
Hortense Santos ◽  
◽  
Rui Dias ◽  
Paula Heliodoro ◽  
Paulo Alexandre ◽  
...  
Keyword(s):  
Random Walk ◽  
Financial Markets ◽  
Weak Form ◽  
Fluctuation Analysis ◽  
Linear Component ◽  
Test Results ◽  
Random Walk Hypothesis ◽  
Regional Markets ◽  
Two Samples ◽  
Non Linear

The new coronavirus disease (Covid-19) evolved quickly from a regional health outbreak to a global collapse, stopping the global economy in a unprecedented way, creating uncertainty and chaos in the financial markets. Based on these events, it is intended in this paper to test the persistence of profitability in the financial markets of Argentina, Brazil, Chile, Colombia, Peru and Mexico, in the period between January 2018 to July 2020. In order to perform this analysis where undertaken different approaches in order to analyze if: (i) the financial markets of Latin America are efficient in their weak-form during the global pandemic (Covid-19)? ii) If so, the persistent long memories cause risks between these regional markets? The results suggest that the returns don’t follow the i.i.d. hypothesis, from dimension 2, reinforcing the idea that returns of stock indexes have a non-linear nature or a significant non-linear component, exception made to the Argentina market, which was expected in virtue of the Ljung-Box (with the return squares) test results, and ARCH-LM. Corroborating the exponents Detrended Fluctuation Analysis (DFA), indicate the presence of persistent long memories, namely into the following markets: Colombia (0.72), Chile (0.66), Brazil (0.58) and Peru (0.57). The Argentina market does not reject the random walk hypothesis, while the Mexican market suggests some anti-persistence (0.41). This situation has implications for investors, once that some returns can be expected, creating arbitration opportunities and abnormal income, contrary to the supposed from the random walk hypothesis and information efficiency. The t-test results of the heteroscedasticity form the two samples suggest that there is no risk transmission between these regional markets, with the exception to the BOVESPA / BOLSAA MX markets, that is, the existence of persistent long memories in the returns does not imply the risk transmission between markets. These finds allow the creation of strategies of diversification inefficient portfolios. These conclusions also open space for the market regulators to implement measures that guarantee a better informational information of these regional markets.

scholarly journals Methods of Estimating Correlation Coefficients in the Presence of Influential Outlier(s)

2021 ◽  
Vol 4 (3) ◽  
pp. 157-185
Author(s):  
Etaga H.O. ◽  
Okoro I. ◽  
Aforka K.F. ◽  
Ngonadi L.O.
Keyword(s):  
Correlation Coefficient ◽  
Pearson Correlation ◽  
Correlation Coefficients ◽  
Pearson Correlation Coefficient ◽  
Spearman Correlation ◽  
Correlation Methods ◽  
Linear Relationships ◽  
Median Correlation ◽  
Standing Problem ◽  
Research Analysis

Correlation methods are indispensable in the study of the linear relationship between two variables. However, many researchers often adopt inappropriate correlation methods in the study of linear relationships which usually leads to unreliable results. Recurrently, most researchers ignorantly employ the Pearson method in a dataset that contained outliers, instead of more appropriate correlation methods such as Spearman, Kendall Tau, Median and Quadrant which might be suitable in the calculation of correlation coefficient in the presence of influential outliers. It is noted that the accuracy of estimation of correlation coefficients under outliers has been a long-standing problem for methodological researchers. This is due to low knowledge of correlation methods and their assumptions which have led to inappropriate application of correlation methods in research analysis. Five different methods of estimating correlation coefficients in the presence of influential outlier (contaminated data) were considered: Pearson Correlation Coefficient, Spearman Correlation Coefficient, Kendall Tau Correlation Coefficient, Median Correlation Coefficient and Quadrant Correlation Coefficient.

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