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Validity of EMH; A Case Study of KSE-100 Index


  • Naz, Salma

    () (Sukkur Institute of Business Administration)

  • Razaque, Seema

    () (Sukkur Institute of Business Administration)

  • Khuwaja, Hyder Ali

    () (Sukkur Institute of Business Administration)

  • Ahmed, Niaz

    () (Sukkur Institute of Business Administration)


The emerging markets offer major investments opportunities for a range of investors over the last decades especially after the global financial crises,which attracted the attention of investors and financial researchers towards the market efficiency.This research paper is designed to verify other researchers work, because some of them have provided contradictory results to test the market efficiency of Pakistani stock index (KSE-100). Average daily observations are considered for the period of twenty two years (November 02, 1991 to December 31, 2012). Unit Root tests (ADF, PP and KPSS), Runs test, Serial Autocorrelation (L-Jung-Box Q statistic) techniques are used to analyze the market’s informational weak form efficiency. Return time series is not normally distributed because it is negatively skewed and leptokurtic. All of the tests applied provide sufficient statistical evidence to reject the Random Walk Hypothesis thus KSE-100 shares index is informational weak form inefficient.

Suggested Citation

  • Naz, Salma & Razaque, Seema & Khuwaja, Hyder Ali & Ahmed, Niaz, 2014. "Validity of EMH; A Case Study of KSE-100 Index," Sukkur IBA Journal of Management and Business, Sukkur IBA University, vol. 1(1), pages 112-126, October.
  • Handle: RePEc:ris:ibajmb:0007

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    References listed on IDEAS

    1. Cooray, Arusha. & Wickremasinghe, Guneratne., 2007. "The efficiency of emerging stock markets: empirical evidence from the south asian region," Journal of Developing Areas, Tennessee State University, College of Business, vol. 41(1), pages 171-183, September.
    2. Abdul Haque & Hung-Chun Liu & Fakhar-Un-Nisa, 2011. "Testing the Weak Form Efficiency of Pakistani Stock Market (2000–2010)," International Journal of Economics and Financial Issues, Econjournals, vol. 1(4), pages 153-162.
    3. Abraham Abraham, 2002. "Testing the Random Walk Behavior and Efficiency of the Gulf Stock Markets," The Financial Review, Eastern Finance Association, vol. 37(3), pages 469-480, August.
    4. Eduardo Jose Araujo Lima & Benjamin Miranda Tabak, 2004. "Tests of the random walk hypothesis for equity markets: evidence from China, Hong Kong and Singapore," Applied Economics Letters, Taylor & Francis Journals, vol. 11(4), pages 255-258.
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    More about this item


    KSE-100; shares; index; Random; Walk; Hypothesis; Informationally; weak;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets


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