The Random Walk Hypothesis for the Zimbabwe Stock Exchange: January 1998November 2006 (original) (raw)

The Random Walk Hypothesis for the Zimbabwe Stock Exchange

The main intention of this study was to investigate, using monthly data, whether prices in the Zimbabwe Stock Exchange (ZSE) follow a random-walk process as required for there to be market efficiency. The study applied the unit root tests to establish if the ZSE followed a random walk or not. If the ZSE follows a random walk it is said to be efficient and therefore managers of companies and investment specialists cannot take advantage of it to make unnecessarily huge profits. The ZSE was chosen because it represents a typical emerging stock market in Sub-Saharan Africa. The study used the Augmented-Dickey Fuller (ADF) tests with a lag length that was necessary to remove autocorrelation from residuals. Using monthly data from January 1998-November 2006 we found that the ZSE did not follow a random walk and therefore was not efficient in the weak form. This meant that past prices had an influence in the determination of future prices and this provided an opportunity for out-performance by skillful financial managers and investment specialists. During the period studied investment analysts and managers of companies were able to take advantage of these investment opportunities to make abnormal returns from the ZSE. The current study helped to corroborate the findings of a similar previous study that was carried out on the Zimbabwean economy for the period 1990-1998 [8] .

Random Walk Hypothesis : Evidence from Market Efficiency of the Zimbabwe Stock Exchange

2015

This study examined whether the share prices of companies listed on the Zimbabwe Stock Exchange follow the Random Walk Hypothesis. The research was motivated by the fact that investors are interested in knowing whether past share prices have a propensity to forecast future share prices. The period covered by the research was January 2014 to December 2014. The main objective of the study investigated the possibility that share prices follow the Random Walk Hypothesis. The data was analysed using the Chisquare Test, the Runs Test and the Auto-correlation Test. The findings showed that changes in share prices on the ZSE refute the Random Walk Hypothesis. The study concluded that share price shifts follow some pattern or trend and that historical price changes can be used to predict future price movements. The study also concluded that the ZSE provides an opportunity for investors to create wealth as they take advantage of its weak-form inefficiency.

The Efficacy of the Random Walk Hypothesis in the Nigerian Stock Exchange Market

European Journal of Business and Management, 2015

The Efficient Market Hypothesis (EMH) has been a subject of considerable debates in developed economies; for some time now. The debate has been carried into the emerging market. This study contributes to existing evidence on the efficiency of emerging stock markets using data from the Nigerian Stock Exchange (NSE). Quantitative research method was adopted by conducting Normality test, Runs test and modified version of Augmented Dickey-Fuller unit root tests to examine whether stock price changes in the Nigerian stock exchange market were random. Findings from the study reveal that changes in stock price were random. Overall result from the empirical analysis suggests that the Nigerian stock exchange is efficient in the weak form. Keywords: Efficient Market Hypothesis (EMH), Random Walk Theory, Normality and Runs Tests, Nigerian Stock Exchange (NSE), Weak form Efficient.

The Random Walk Theory And Stock Prices: Evidence From Johannesburg Stock Exchange

International Business & Economics Research Journal (IBER), 2014

In this paper, we test the Johannesburg Stock Exchange market for the existence of the random walk hypothesis using monthly time series of the All Share Index (ALSI) covering the period 2000-2011. Traditional methods, such as unit root tests and autocorrelation test, were employed first and they all confirmed that during the period under consideration, the JSE price index followed the random walk process. In addition, the ARIMA model was constructed and it was found that the ARIMA (1, 1, 1) was the model that most excellently fitted the data in question. Furthermore, residual tests were performed to determine whether the residuals of the estimated equation followed a random walk process in the series. The authors found that the ALSI resembles a series that follow random walk hypothesis with strong evidence of a wide variance between forecasted and actual values, indicating little or no forecasting strength in the series. To further validate the findings in this research, the variance ratio test was conducted under heteroscedasticity and resulted in non-rejection of the random walk hypothesis. It was concluded that since the returns follow the random walk hypothesis, it can be said that JSE, in terms of efficiency, is on the weak form level and therefore opportunities of making excess returns based on out-performing the market is ruled out and is merely a game of chance.

Testing Random Walk Hypothesis: A Study on Dhaka Stock Exchange of Bangladesh

In the report, I have tried to find out whether the taken data series, DSEG, Dhaka Stock Exchange of Bangladesh behave randomly and also to check whether the market is weak form efficient or not. To check this, Histogram, Quantile(Q) Plot, Autocorrelation Function, Phillips Perron Unit Root Test and Augmented Dickey Filler Unit Root Test are used. The findings are that the data series isn’t normal and market is not weak form efficient.

The Empirical Investigation of Why Stock Prices on the Nigerian Stock Exchange Exhibit Random Walk

2020

This study empirically investigated whether stock prices on the Nigerian stock exchange exhibit a random walk. Using monthly data from the Central Bank of Nigeria all share index from 1985-2011, the study employed a stepwise approach where the standard linear GARCH (1.1) is applied to capture randomness in terms of volatility clustering. The result proved that the Nigerian stock market is weakly stationary, meaning stock prices on the Nigerian stock market follows a random walk, which is an indication of weak-form efficiency. Therefore, the Nigerian stock market displays a random walk process. Nevertheless, the years 1987, 1991, 1995, 1997, 2001, 2002, 2008, and 2011 demonstrated negative skewness, which is a signification of non-randomness of the market for these years. Besides these years, other years were significantly proven to follow a random walk. Therefore, the Nigerian stock market exhibits a random walk process. Accordingly, investors can obtain a more excellent perception ...

Testing the Random Walk: The Case of Hong Kong Stock Exchange

2014

The purpose of this paper is to investigate random walk in HongKong stock exchange. The unit root, autocorrelation and the variance ratio tests are applied, using daily data on returns of two indexes in the period 1997:7 to 2012:12. For two indexes, the null hypothesis of random walk is rejected and therefore the markets are no weak-form efficiency.

An Empirical Examination of Random Walk Hypothesis for Chittagong Stock Exchange

AIUB Journal of Business and Economics, 2015

A capital market will play as a strong catalyst in the industrialization and economic development of the country. The Chittagong Stock Exchange (CSE) is a new and emerging stock exchange located in the port city of Chittagong in southeastern Bangladesh. This paper investigates whether the stock price index in the Chittagong Securities Market meets the criterion of weak-form market efficiency. This study seeks evidence supporting the existence of market efficiency in the Chittagong Stock Exchange Ltd (CSE).In this paper; we have analyzed the behavior of daily return of Chittagong Stock Market indices. The sample includes the daily price indices of all securities listed on the CSE All Share Index, CSE 30 index, and CSCX indices listed in the Chittagong stock market. The results from the unit root test, the ADF test on CSE All Share Index, CSE 30 index, and CSCX provide evidence that the Chittagong stock exchange (CSE) is not efficient even in weak form and CSE does not follow the random walk model. Key Words: Efficient Market Hypothesis, Random walk model, Chittagong Stock Exchange

The Random Walk Model in the Karachi Stock Market: An Empirical Investigation

International Journal of Innovation and Sustainable Development

The study empirically investigates the weak form efficiency test in Karachi Stock Exchange. Augmented Dickey Fuller test and variance ratio test are used to investigate the weak form efficiency. The data used in this study is daily covered from January, 1995 to December 2011. Twenty-one companies are selected out of 659 companies listed with Karachi stock exchange. The methodology is to select these 21 companies is number of days trading. In order to avoid the possible bias Lo and MacKinlay, (1988) technique for a longer time period is used. Those companies are selected whose trading days are at least 3500 days during the study period. The result of ADF test for stationarity shows that the existence of random walk in KSE-100 index and all selected firms. However, the existence of random walk components in stock prices does not necessary implies that stock returns are unpredictable. The result of ADF test on the KSE-100 index and selected firms stock returns does not tell whether the short-term fluctuations dominate the stochastic trend components. With consideration of these aspects we apply variance ratio test. The results indicate that, it might reject the null hypothesis of random walk for all holding periods of KSE-100 index and all selected firms on the basis of variance ratio test which is statistically significant at 5 percent level. The weak for efficiency is prevailed in both reform period only.