Testing the Weak Form State of Market Efficiency: An Empirical Evidence of Shariah Compliant Index

Authors

  • Naveed ul Hassan Virtual University of Pakistan
  • Prof. Dr. Hafiz Zafar Ahmad Hailey College of Commerce, University of the Punjab, Pakistan
  • Dr. Rashid Aftab Riphah International University, Pakistan

Keywords:

EMH, Weak Form Efficiency, KMI-30, Variance Ratio Test, BDS Test

Abstract

The efficient market hypothesis (EMH) proposed by Fama is considered a central premise to explain market functioning. The objective of this research is to test the stock returns behavior of Shariah compliant Karachi Stock Exchange Meezan Index (KMI 30) under weak form efficiency. Based on the nature of data, i.e. time series, this study has employed linear and non-linear techniques to assess state of market efficiency. The results of the study portray that KMI-30 is an inefficient market and there is dependence in the series. The findings of this study are also helpful for financial analysts for constructing diversified investment portfolios.

Author Biography

Prof. Dr. Hafiz Zafar Ahmad, Hailey College of Commerce, University of the Punjab, Pakistan

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Published

2020-12-30

Issue

Vol. 10 No. 2 (2020): Volume 10, Issue 2, December 2020

Section

Research Articles