The Efficiency of Developed Markets: Empirical Evidence from FTSE 100

Abstract

This paper endeavors to examine weak form efficiency in the Financial Times Stock Exchange 100 (FTSE 100) under the ongoing theory of efficiency, namely the Efficient Market Hypothesis (EMH). In particular, this paper aims to examine the presence of random walk in FTSE 100 during the period from 2001 January to 2009 November which could be the end of the peak of the global financial crisis. Unit root tests such as ADF and PP shows that the market is non-stationary and therefore, random walk hypothesis is accepted. According to GARCH (1, 1) outcomes, in all condition the market prices follow the random walk supporting the weak form market efficiency hypothesis. It can be concluded that in developed markets such as FTSE 100, the existence of weak form market efficiency is evident.