Abstract
This research aims to investigate the presence of weak form of efficiency and stock return predictability in Pakistani Equity Market. The daily return on stock here is used to verify the weak form of market efficiency in Karachi Stock Exchange (KSE). For this purpose a data set from August 1998 to August 2013 was obtained and applied ADF, PP test, Run test, Autocorrelation and OLS model. These entire tests are applied to check the hypothesis of Randomness in stock returns. The result revealed that return distribution of KSE is not normally distributed and short term predictability exists in KSE. There is day of week effect. The study has important implications for investors and regulatory authority. This study is limited to the sample element and period. Future study may be conducted by taking Tuesday as a first day of week followed by Monday holiday to testify daily predictability in KSE.
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