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Testing different forms of efficiency for Dhaka Stock Exchange

Author

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  • Jarka Arefin
  • Rashedur M. Rahman

Abstract

The Efficient-Market Hypothesis (EMH) asserts that efficient markets are informationally efficient or all information (market, public or private) should reflect on stock prices. No one could earn excess profit using any kind of information in efficient market. There are three forms of efficiency in markets: strong, semi-strong and weak. We tested EMH for Dhaka Stock Exchange (DSE) for the period 2003–2005. We used the excess return market model to test the semi-strong form efficiency of DSE. Two forecasting techniques, Autoregressive Integrated Moving Average (ARIMA) and neural network, are used to test the weak form efficiency of DSE. We get excess return for many stocks listed in DSE, demonstrating that DSE is not an efficient market in semi-strong form. Besides, the DSE market index is not random and the trend could be captured by ARIMA and neural network techniques. Therefore, the DSE is also not an efficient market in weak form.

Suggested Citation

  • Jarka Arefin & Rashedur M. Rahman, 2011. "Testing different forms of efficiency for Dhaka Stock Exchange," International Journal of Financial Services Management, Inderscience Enterprises Ltd, vol. 5(1), pages 1-20.
    • Handle: RePEc:ids:ijfsmg:v:5:y:2011:i:1:p:1-20
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    Cited by:

    1. M. Punniyamoorthy & Jose Joy Thoppan, 2012. "Detection of stock price manipulation using quadratic discriminant analysis," International Journal of Financial Services Management, Inderscience Enterprises Ltd, vol. 5(4), pages 369-388.
    2. Shekar Bose & Hafizur Rahman, 2022. "Are News Effects Necessarily Asymmetric? Evidence from Bangladesh Stock Market," SAGE Open, , vol. 12(4), pages 21582440221, October.

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