Random Walk in Emerging Markets: A Case Study of the Karachi Stock Exchange

  • Orla Gough
  • Ali Malik
Part of the Centre for the Study of Emerging Markets Series book series (CSEM)

Abstract

The efficient capital market hypothesis has been one of the dominant themes in the academic literature since the 1960s. It was generally believed that securities markets were extremely efficient in reflecting information about individual stocks and about the stockmarket as a whole. When we refer to the efficient capital market hypothesis, we mean that security prices fully reflect all available information (Elton and Gruber, 2003). Three forms of market efficiency have been suggested subject to different information sets (Roberts, 1959; Fama, 1970). Under the weak form of the efficient market hypothesis (EMH), stock prices are assumed to reflect any information that may be contained in the past history of the stock price. Under the semi-strong form all publicly available information is presumed to be reflected in the securities prices. Finally, the strong form takes the theory of market efficiency to the ultimate extreme. It claims all information is reflected in stock prices, including private or insider information as well as that which is publicly available. There exists a strong measure of consensus on the validity of the weak and semi-strong forms of the EMH with respect to capital markets in developed countries such as the USA, Britain and Japan (Dickinson and Muragu, 1994). This view is supported by the tremendous amount of research evidence (for a comprehensive review see Fama, 1970, 1991, and Keane, 1983).

Keywords

Autocorrelation Alan 

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© Orla Gough and Ali Malik 2005

Authors and Affiliations

  • Orla Gough
  • Ali Malik

There are no affiliations available

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