Testing the Weak Form of Efficient Market Hypothesis: Empirical Evidence from Asia-Pacific Markets

Abstract

This empirical study is conducted to test the weak-form market efficiency of the stock market returns of Pakistan, India, Sri Lanka, China, Korea, Hong Kong, Indonesia, Malaysia, Philippine, Singapore, Thailand, Taiwan, Japan and Australia. Monthly observations are taken for the period January 2004 to December 2009. Autocorrelation, Ljung-Box Q-statistic Test, Runs Test, Unit Root Test and the Variance Ratio are used to test the hypothesis that the stock market follows a random walk. Monthly returns are not normally distributed, because they are negatively skewed and leptokurtic. In aggregate we concluded that the monthly prices do not follows random walks in all the countries of the Asian-Pacific region. The investors can take the stream of benefits through arbitrage process from profitable opportunities across these markets.