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Is the Mongolian Equity Market Efficient? Empirical Evidence from Tests of Weak-Form Efficiency

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Listed:
  • Lim Kai Jie, Shawn
  • Chadha, Pavneet
  • Lau, Joshua
  • Potdar, Nishad

Abstract

This paper investigates the empirical validity of the weak-form of the Efficient Market Hypothesis in the Mongolian equity market over Jan 1999 to Jul 2012. We examine the characteristics of the market by testing the fit of returns to a normal distribution using the Jarque-Bera Test, and find strong evidence against normality. The data also exhibits positive skewness and a high level of excess kurtosis. Next, we test for the presence of autocorrelation using the Ljung-Box Q Test and the non-parametric Runs Test, and find strong evidence against the null hypothesis of no autocorrelation for both of these tests. Finally, we test the associated Random Walk Hypothesis using the Augmented Dickey- Fuller Test and the Chow-Denning Multiple Variance Ratio (MVR) Test. We reject the null hypothesis of the presence of a unit root for the Augmented Dickey-Fuller Test. In addition, we find evidence against the Random Walk Hypothesis even after adjusting for the possible presence of heteroscedasticity in the MVR Test. Since all the tests present results consistent with weak-form inefficiency, we reject the weak-form of the Efficient Market Hypothesis for the Mongolian equity market.

Suggested Citation

  • Lim Kai Jie, Shawn & Chadha, Pavneet & Lau, Joshua & Potdar, Nishad, 2012. "Is the Mongolian Equity Market Efficient? Empirical Evidence from Tests of Weak-Form Efficiency," MPRA Paper 41834, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:41834
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    File URL: https://mpra.ub.uni-muenchen.de/41834/1/MPRA_paper_41834.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Weak-form efficient market hypothesis; Mongolian equity market; Random walk hypothesis;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G1 - Financial Economics - - General Financial Markets

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