Efficiency in a Thinly Traded Market: The Case of Pakistan
AbstractThis paper tests the weak form efficiency hypothesis in the Pakistani equity market. Using daily closing prices of 36 stocks, 8 sector indices, and the market index from January 1, 1989 to December 30, 1993 and applying Serial correlation and Runs analysis, the paper does not find the market to be efficient. The market exhibits strong serial dependence and the factors responsible appear to be infrequent trading and stock returns volatility. The intertemporal behavior of serial dependence suggests that the serial dependence increased significantly when the market was opened to international investors but started to decrease after a year. The analysis indicates that the Pakistani market adjusts slowly to new information. This points to the weaknesses of the market regarding the dissemination of pertinent information to potential investors, suggesting that effective measures should be taken in this regard.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 5355.
Date of creation: 1999
Date of revision:
Publication status: Published in Savings and Development 4.23(1999): pp. 457-473
Efficiency; Pakistan; Thin Trade; Serial Dependence; Runs Analysis;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
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