Testing the Weak Form Efficiency in Pakistan’s Equity, Badla and Money Markets
AbstractThe paper test the weak form market efficient hypothesis for Pakistan’s equity, badla and money markets with an aim to investigate which one of them is most efficient in the weak form sense. The analysis provides evidence, under the assumption of heteroscedasticity, that the KSE is weak-form efficient over the full-length sample period. Nevertheless, the analysis reports that over the same period the other two markets viz. badla and money are not weak form efficient. The badla market was efficient over the first sub-period. An important finding of this effort is that “badla mechanism” became weak form inefficient after equity market severely affected in February 2005. Inefficient badla market may be one of the major reasons behind the malicious instability of the equity market in Pakistan. We hope that this finding can guide the policymakers in formulating strategies to provide a weighing scale in financial mechanism.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 22285.
Date of creation: 2009
Date of revision:
Weak Form Efficiency; Stock Returns; Badla Rate; Repo Rate; March Crises; Variance-Ratio Tests;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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