(Cooray, 2007), assess the weak form of efficiency in the South African stock exchange market.

He defined the Stock market efficiency is a significant idea in terms of an appreciative of the
operations of the capital markets. The competence of the developing markets undertakes greater
importance as the tendency of investments is hastening in these markets as a consequence of
regulatory improvements and removal of other obstacles for the international stock funds
(Cooray, 2007). He described the word market efficiency is used in the relationship between
information and share prices in the capital market collected works. Many of the authors offers
the formal description of Market Efficiency that categorizes market efficiency into three classes;
1) Weak form 2) semi Strong form and; 3) Strong form. The respective author along with the
South African Stock market also had determined the efficiency in the stock markets of India, Sri
Lanka, Pakistan and Bangladesh. The Increased Dickey Fuller (ADF-1979, 1981), the Phillips
Perron (PP-1988), the Dickey-Fuller Sweeping Least Square (DF-GLS-1996) and Elliot
Rothenberg Stock (ERS 1996) tests are used to inspect weak form stock market efficiency.
Weak form efficiency is maintained by the standard unit root exams. However, it is not strongly
sustained for Bangladesh underneath the DF-GLS and ERS tests. Integration and Granger
causality tests are used to inspect semi-strong form efficiency. Semi-strong form efficiency is not
maintained as these tests indicate a high degree of interdependence among the South Asian stock
markets.
(Hanif, 2012), used to described the South Asian market and he supported the evidences for
market efficiency is that a market is measured weak form efficient if present prices fully reflect
all information confined in historical prices which infers that no investor can develop a trading
rule founded solely on past price strategy to earn anomalous returns. A market is semi strong
effectual if stock prices promptly reflect any new publicly accessible information and Strong
form efficient if prices replicate all types of information whether existing publicly or privately.
He include India, Pakistan, Bangladesh and Sri Lanka. Past index values on a monthly, weekly
and daily basis for a dated of 14 Years (1997-2011) were used for study. He applied four
statistical tests counting runs test, serial correlation, unit root and modification ratio test.
Findings recommended that none of the four major stock markets of south-Asia trails Randomwalk and hence all these marketplaces are not the weak form of efficient market. To the
information this is the first ever study is being lead which covers leading South Asian
marketplaces, hence an indication on market efficiency of this area is being paid in literature.

One of the basics of modern financial markets is the intention that markets are well-organized. In
modern finance the perception of market efficiency is best clarified through the efficient market.
Different researchers explicated the concept of Market Efficiency in relation to the stock prices
after the principal work. The form of change in market prices are casual and preceding pattern
has no expectedness factor for upcoming market prices. Today in fiscal economics it becomes a
most domineering research area because it carries a relation between the Market Efficiency and
predictive element of stock market profit. The concept of market efficiency after the exploration
on the developed market data is that essentially the prices are the likeness of all available
community information. This concept could be a symbol that there is superior degree of market
efficiency on which the stock markets function.
(Ashraf, 2011), examine the efficiency in the market being assessing that Efficient Market (EM)
accepts that security markets are effectual in shimmering information concerning specific stocks
and the stock market in universal. Market efficiency notion is important to a depositor who
required to capitalize in the stock market. A stakeholder with an expanded portfolio of discrete
securities with similar risk achieve greater yields to one who depend on only on the banquet of
information about stock fees without technical and vital analysis about the information. An
efficient market has slight or no rubbing in the trading procedure. Information on prices and sizes
of past contacts is widely available and price subtle information is both opportune and precise.
Thus information broadcasting is fast, timely, feast easily and is reflected in the numerous assets
on the Stock Market. The idea of his study is to empirically inspect the accounting information
on financial statement data which is publicized in Annual General Meeting (AGM) enter the
results of investors by scrutinizing whether current changes in the signals are edifying about
subsequent changes in stock prices of Karachi stock Exchange (KSE) 30 listed companies from
January to December 2010. The study has valued the abnormal returns by using the market
model not compulsory and has found strong evidence of declaration of financial results effect on
stock prices.
(Abdul Haque, 2011), examine the liquidity in the stock markets of Pakistan and assess the
financial consequences in the Pakistani stock markets. He described that liquidness is such that it
allows market participants to buy or sell rapidly at a price close to the last dealt price. Also, there
is price steadiness, such that prices do not modification much from one business to another
unless noteworthy new information becomes accessible where a market can developed effectual

if investors see the marketplace as incompetent and try to outdo it. On the conflicting, investment
strategies intended to take gain of ineptitudes are actually the tool that keeps a market effectual.
Author also claimed that when cash is place into the stock market, it is done with the aim of
producing a return on the capital capitalized. Many shareholders try not only to make a gainful
return but also to outclass or beat the souk as arbitrage operations. The stock market focus to
variations in pricing the equal as the commodity market and hers victory depends on the positive
prediction of future prices and only imaginable if information is accessible in the market. Author
had empirically tests out the weak form efficiency of Pakistani stock market by investigative the
weekly KSE 100 index over the period 2000-10. Return series has a leptokurtic and destructively
skewed distribution, which is absent from normal distribution as replicated by significant JarqueBera indicator. Estimated results of ADF (1979), PP (1988) and KPSS (1992) experiments,
Ljung-Box Q-Statistic of auto-correlations and runs test of uncertainty reject the Random Walk
Hypothesis (RWH) for the yields series. Moreover the results of modification ratio test (Lo and
MacKinlay (1988)) also castoff the RWH and prove the robustness of other valued results. The
denial of RWH exposes that the Pakistani stock prices are not Weak Form Efficient. Though,
market efficiency been ran by the efficient market (EM) built-up by Fama has recommended that
at any given period prices fully reflect all obtainable information about an discrete stock and the
market in general. Author secret market efficiency into three procedures namely as per the prior
literatures; the 1) weak form 2) semi strong form, and; 3) strong form. Fama further well-known
that if the market is effectual in the weak form, rates reflect all past security market statistics;
hence data on past prices and trading sizes cannot be used for revenue. A semi strong form
efficient market is a flea market in which rates fully reflect all freely available information. This
form is anxious with both the speed and exactness of the markets response to information as it
develops available. For the strong form efficiency, Fama clarified that prices are predictable to
reflect both public and secluded information, which looks to be more worried with the disclosure
efficacy of the information market than the valuing efficiency of the safeties market.
(Choi, 2007), examine the market efficiency from the different stock markets to evaluate the
market result in consequences of efficiency terms. In financial Markets, the concept of market
efficiency is leading. Largely, efficiency is a word that refers to a market in which relevant
information is reproduced in the stock prices. Sometimes, however, economists use this word to
refer to working efficiency, highlighting the way resources are employed to ease the operation of

the market. An efficient market can be labelled as the market in which stock prices assimilate
and reproduce all available information whether it is past or contemporaneous. Stock market is a
conundrum for many people who contemplate that it has something to do with resources only
whereas many have faith in it is a heaven for bettors and is not related to mutual man in any
sense. Stock market is an abode where we can buy or sell shares and safekeeping. Stock market
can be easily unspecified by splitting it into primary and secondary marketplaces. Primary
market is where corporations and organization issue shares and securities to the public to
investment for their operations. This way savings of the people are moving for creative schemes.
Secondary markets offer the investors a prospect to sell their shares and securities to other
financiers. These trades are facilitated by the brokers who charge an instruction for the order
performed by them on behalf of their customers. He deals with the testing of the weak form of
efficiency on Czech and Slovak stock market through the period 2000-04 based on daily returns
in lieu of index PX50 and SAX30 in the method of martingale as well as in the form of random
walk. Regarding functional model forms of restricted variance, the linear and non-linear
volatility models have been assessed and half-life of the adjustment on the markets, presence of
leverage effect or risk antipathy have been assessed.
(ASHRAF, 2006), had taken into account the Pakistani stock markets to evaluate the weak form
of efficiency. There are three stock markets here in Pakistan that are 1) Karachi Stock Exchange
2) Lahore Stock Exchange 3) Islamabad Stock Exchange. Karachi Stock Exchange (KSE) is the
first stock exchange of the country. It was integrated on March, 1949 and started with 5
corporations with a paid up capital of Rs.37 Million and now the market capital is equal to 26.48
Billion US Dollar with 651 businesses listed on the Exchange. It has four keys i.e. KSE 100
index, KSE 30, KMI 30 and KSE All Shares Index. KSE 100 Index is utmost signified index of
the Pakistani stock market. The KSE-100 Index was presented in November, 1991 and was recomposed in November 1994. This index presented a return of 40.19% for the year 2007. Author
had applied the random walk model on the different companys financial data to know about
their fluctuation in their stock and market prices. The result revealed that the market is efficient
in Pakistan and had direct push because of the economic situations in here. The stock value
decreases down as per the low in the company performances and the collective effect was
appeared in the form of low efficiency in the market. A well-organized capital market is that in
which stock prices reflect all obtainable info. In an efficient market, evidence should be available

to all investors at the same time and should not be constrained to few depositors only. Free flow
of info is required by savers to make informed asset decisions. The financial statement data or
fundamental signals consequence the resolutions of market players who are examining the
current changes in the signs and also the following changes in them. The important signals that
reflect relatives in current office data that are fictional to antedate future earnings deviations. The
pool of signals which especially comprises material concerning changes in financial statements
signify traditional rule of fundamental analysis working by professional financial analysts to
antedate future company enactment. One ailment for earning irregular returns is that the info
generated by an important scrutiny expected future economic variables that will finally be
combined in share price by the market. Previous work done on the KSE presents a gathering of
fundamental signals that reflect relatives in current accounting data that are supposed to
prediction future earnings variations. Author establish the value significance of these signals by
presentation they are meaningfully associated in the directions foretold with stock returns
intended with the revelation of the signals and find direct indication that both future incomes and
to a lesser degree analysts' prediction revisions of future wages are meaningfully related with
several of the indications over the example period they inspect. This direct indication of a
relation between separate signals and future salaries suggests that the observed overtone between
simultaneous returns and the important signals reflects in part the signals' aptitude to predict
value pertinent information.
(Khurram Sultan, 2013), had impermanent mispricing using fundamental analysis highlights the
prediction of future rates, which is alike to the work done previously by the many of the authors
in the respective field of study. However, it differs in two ways. The first one is they do not
recognize a prior conceptual influences for studying any of their descriptive variables or to test
rival theories for how they might be connected to future rates. They start with a thorough list of
secretarial ratios that have been rummage-sale to label firms' leverage, activity and success, and
rely on uni-variate relations between these variables and future rates changes to limit the number
of interpreters on which to focus. Yet, their approach retains a justly large number of descriptive
variables some of which tailspin to inspire any understandable logic as to why they would be
good analysts of future earnings. Empirical tests of the efficient market hypothesis really test for
these significances in various ways. Some of them have been brief in earlier chapters. These tests
generally could not conclusively accept the random walk hypothesis of stock yields even when

GARCH effects were accounted for. Many studies have found experimental regularities that are
opposing to the efficient market hypothesis. For example, the monthly, weekly and daily yields
on stocks tend to exhibit discernable figures, such as seasonal affects, month of the year affect,
day of the week affect, hourly affect etc. In case of Pakistans stock markets too such affects are
known. Such as the Ramadan affect, periodic effects and day of the week affect. Further, the
wide banquet use of practical analysis among stock traders and their ability to envisage to
some extent the direction of travels in the prices of individual stocks over medium term states to
the existence of patterns and periodic trends. Moreover, the set of forecasters changes from one
short estimate period to the next deprived of any follow-up examination to explain why creation
it both difficult to locate the monetary forces reproduced in these variables and to feat a
consistent strategy crossways time. In difference, JA and BB attention on strategy on a minor
number of variables specifically driven by arguments for why these indications would be
predictable a prior to be related to future rates changes. In cases where a conjectured relation was
opposite to that predictable they rely on the consequences of supplemental background analyses
performed by AB to defend their attempts to exploit that observed relative in a following period.
Second difference is that they combine their forecasters into a single swift measure, obscuring
the separate signals' influence to earning abnormal returns and warning the extent of knowledge
increased about important analysis. Nevertheless, with maintained an emphasis on individual
signs throughout their examination, author evaluated the heftiness of each signals' predictive
power and explore background factors that influence their in-formativeness.
(Wydick, 2012), examine the systematic platform of stock market development and engrossed
observed difficult is a more real approach to discriminating among other explanations for
observed clans. Many of the authors has censured the strategies that significance to exploit
pricing incongruities is that they truly identify vicissitudes in expected revenues brought on by
shifts in mysterious risk factors. Though documentation of shifts in firm risk finished the practice
of important analysis is stimulating and worthy of future research attention on the development
of stock market if observed "irregular" returns are solely attributable to a policy's ability to
reflect vicissitudes in risk, the outdated arguments for supporting such analyses would not be
defensible. Therefore, authors have explored in their modification to assess the degree to which
the important signals' connotation with irregular returns concurs with their ability to convey
evidence about future earnings rather than shifts in risk. However, it is contended that the stock

prices fail to directly reflect publicly obtainable information raises a query about the
independence of evidence from that before reported pricing incongruities. Many of the important
signals deliberate are comprised of working principal items, signifying the option that returns to
the important strategy may be related to the market's disappointment to recognize that the
accumulation component of earnings is of lower perseverance than the cash flows module, a
phenomenon recognized by Sloan (1996). Many of the authors also conducted vigor tests to
check that controls for Sloan's accumulation anomaly, as well as the book-to marketplace and
size belongings do not impact their consequences.
(Ch. Mazhar Hussaina, 2013), examine the stock market forms within context of the market
prices. Stock prices alter in response to impulsive information and since it enters the market
arbitrarily, so the price variations also become chance. There are three forms of market
development and efficiency. 1) Weak form efficiency 2) Semi strong form efficiency, and; 3)
Strong form efficiency. These forms have their individual impact on the market. In Weak Form
Efficiency (WFE), the stockholders cant forecast the future prices in spite of having deep
sympathetic of the past prices. Even if they do, they cant cover it for an extensive period. Most
of the stock prices swing aimlessly and thus are tough to forecast. In semi strong form, share
prices quickly tune themselves to new evidence available publicly but detain the investors to earn
excess. He explored the relationships between the degree of competence and the predictability in
fiscal time-series data. The Hurst exponent was used as the size of the degree of efficiency and
the hit rate intended from the nearest-neighbor guess method was used for the forecast of the
directions of future price vicissitudes. He used 60 market indexes of various republics and
empirically discovered that the connection between the notch of efficiency (the Hurst exponent)
and the obviousness (the hit rate) is strongly optimistic. That is, a market index with a higher
Hurst exponent have a habit of to have a higher hit rate. These results recommended that the
Hurst exponent is useful for predicting future price changes. Furthermore, we also discovered
that the Hurst proponent and the hit rate are useful as standards that can distinguish emerging
capital markets from mature capital markets. Study of the stock return creating process has long
been subject by curiosity in its random walk properties. Explanation for such concentration is not
hard to find, given that the company of a random walk has imperative suggestions for investors
and trading strategies, fund administrators and asset pricing models, capital markets and weak
form market efficiency and therefore financial and fiscal development as a whole. Swapping

strategies, for example, differ when yields are characterized by random walks or by confident
auto-correlation or determination over short horizons and adverse auto-correlation or mean
degeneration over long horizons. In this occurrence, as the outlay horizon lengthens, a nominee
would invest less in pillories if the virtual risk hatred is greater than accord than if the returns
were in sequence independent. Correspondingly, random walks in stock returns are decisive to
the formulation of balanced outlooks models and the testing of weak form market efficacy
(Jackson, 2007).
(POSHAKWALE, 1996), examine that an efficient market the rates of stocks fully integrate all
applicable information and hence stock returns will display volatile or random walk behavior. In
stock prices not categorized by a random walk the return causing process is dominated by a
momentary component and therefore future incomes can be predicted by the historic sequence of
returns. To finish, the capability of stock markets to play the role that is regularly ascribed to
them charming foreign venture, boosting domestic good and improving the estimating and
availability of principal depends upon the company of random walks. A marketplace following a
random walk is steady with equity being correctly priced at an equilibrium level, but the absence
of a random walk infers misrepresentations in the estimating of capital and risk. This has
imperative suggestions for the allocation of capital within a budget and hence overall fiscal
development. In the last few eras a lot of research labors were made on examining the efficiency
of stock markets and its important role in stimulating the financial capitals. The term Efficient
Market was presented by an US economist Eugene Fama in initial 60s. He well-defined this
term as the market which fast alters itself to new information. In general terms market efficiency
theory predicates that safety prices mull over all info backed by it. A compulsory thing for theory
is the information and the interchange cost i.e. the cost of receiving prices to reflect information
are constantly zero. Efficient Market Hypothesis rants that when investors are watching for
alternative fashion in the stock market, each of the depositors behaves in a very different manner.
(Choi, 2007), had examined the Efficient market (EM) leads the market in the direction of
perfect rivalry where none of the depositors can deed the market in the extensive run. In fact EM
is the claim of Random Walk Theory (RWT), the vital idea of which is that if the brook of
available information is not limited and in sequence immediately imitated in stock prices, it
simply means that stories wandering around have no association with the present change in stock
price. This concept of Efficient Market didnt receive much fame in the origination but became

visible when the evident version of efficient market theory was available. The influential work
provided some new insights in the Efficient Market (EM) and rested down the basis of Random
Walk Model (RWM). In adding, the investigators did not focus on an exact technique or ideal
rather developed numerous methods. These various methods, though apparently dissimilar in
assumptions and implementation but talking the same motive of learning the market efficiency
have been well valued and employed. Though empirically different procedures ranging from
para-metric to non-parametric tests have been practical to identify the stock market but each of
them emphases on the RWH. Occasionally deviations in assumptions may appear because of the
dissimilar time periods or the changing incidence of the data utilized in the study or maybe
driven by the macro or worldwide financial conditions. Yet, the differences in projected results
may lead to the rejection or queries the validity of these technique rather deliver us with a wide
range of choices which allow to model any of the applied situations that could have not been
demonstrated under the strict expectations of one specific procedure and thus may be calculated
under different expectations. The empirical outcomes on developing and developing countries
stock markets have rather mixed consequences and did not support the EM. The analysis of
Kuala Lumpur Stock Exchange and found it to incompetent in reinforced the EM in the
circumstance of Nairobi stock market. It was found that the stock market of Greece to be wellorganized but at the weak level. The results of the component root tests and sequential
correlations along with the innings test exposed that mainstream of the stock markets are
incompetent and the same results were stated by the alteration ratio test. The efficient market
proposes that stock markets are informational well-organized. That is, any new information
pertinent to the market is impulsively reflected in the stock prices.
(HIGGS, 2013), had examined the stock mart efficiency within context of market values of the
stocks. An importance of this EM is that past prices cannot have any prognostic power for future
values once the present prices have been used as a descriptive variable. In other words the
alteration in future prices be contingent only on arrival of new statistics that was erratic today
hence it is based on amazement information. Another importance of this market efficiency is that
arbitrage chances are wiped out rapidly. Empirical tests of the efficient market actually test for
these significances in numerous ways. Some of them have been abridged in earlier Studies.
These examinations generally could not decisively accept the random walk theory of stock
revenues even when GARCH belongings were accounted for. Many studies have found

empirical symmetries that are conflicting to the efficient market. For example, the regular,
weekly and daily profits on stocks tend to exhibition discernable decorations, such as cyclical
affects, month of the year touch, day of the week touch, hourly affect etc. In circumstance of
Pakistans stock markets too such drops are recognized. Such as the Ramadan affect seasonal
special effects and day of the week affect. Further, the wide feast use of practical examination
among stock traders and their aptitude to predict to some degree the direction of activities in the
prices of discrete stocks over medium term appears to the being of patterns and seasonal
tendencies. The existence of these methodical affects may imply informational disorganization of
the stock markets as markets take long time to regulate to new evidence. But there is another
possible clarification too. That is that the markets are informational well-organized and adjust
rapidly and fully to any new part of info but the data arrives in a systematic pattern, hence the
experiential systematic design in stock returns. A direct test of this option is to look for any
connotation between adornment of information arrival and design of market activity variables.
For this it will need some amount of information as well as events for market activity. It also
would have to choose whether to do this examination at firm level or at collective market level.
This direct and humble question of whether the sum of publicly available data affects daily stock
profits and trading dimensions. Such studies are not unusual for stock markets of industrialized
countries although each such study is theme to its own limits.
(Keasey, 2000), had conducted the imperative study in this line of research that focused on
market level collective variables of daily market profits and trading volume on one hand and on
the other hand a comprehensive based evidence variable of number of daily openly proclaimed
news items. Another study with somewhat different stress is that who looked for suggestion in
pattern of hourly public material arrival and collective measures of intraday market action. An
early influential study was fictional a relationship between information movement and stock
market action stating that irregular stock yields in the month of January may be due to aboveaverage flow of evidence generated by businesses in that month. Other later revisions comprise
and looked at delivery of corporate earnings newsflash and collective stock incomes. Even the
occasion study analysis in background of financial markets can also be calculated towards this
line of exploration. One central issue in all such studies is the classification that what founds
information and its size. Researcher bias is bound to come hooked on play in it. In order to
curtail this partiality resorted to a broad amount of information that comprises monetary, macro-

economic, governmental and other types of statistics. To collect data on facts it is necessary to
gathered newsflash that whole headlines in the countrywide newspapers the everyday
Commercial Recorder and the daily Dawn. Another matter in such studies is how to know
the comparative prominence of various kinds of information as not all news items are similarly
significant in the contemplation of market participants. Besides, some news statements may be
probable news therefore these may not influence the market yields if the markets are effectual.
To be precise, the consequence of news be contingent upon change in market estimate time 1minus chance of statement. To the extent the statement is already anticipated the prospect of
surprise have a tendency to zero and hence the consequence of news on the market inclines to
zero. This generates a reduction bias in the test of market efficiency. To take into description this
factor author have removed deviations from ordinary information. And to justification for
changes in relative rank of various kinds of information it has been used journalists as proxies for
comparative prominence of information. In the park of finance, the efficient market (EM) is
based on whether newly created information is promptly and sufficiently reproduced in stock
prices. Founded on the point of time of unit, information can be categorized into three types: 1)
Historical information 2) Public information, and; 3) future or internal information (Desmond
Tutu Ayentimi, 2013). Dependent on the replication of both evidence in stock prices, the EM can
be separated into three types: 1) weak-form of Market Efficiency of historical information 2)
semi strong-form Market Efficiency of public information, and; 3) Strong-form form Market
Efficiency of future information. Recent study in the field of Stock Market exploratory properties
and marvels of monetary time series through inter-disciplinary educations are mostly connected
to weak form Market Efficiency (Abdul Haque, 2011). The detail that weak-form Market
Efficiency is reinforced by economic time-series means that ancient information such as similar
price modification designs is not useful for foreseeing future price vicissitudes. On the other
hand, the detail that weak form Market Efficiency is not reinforced means that alike price change
patterns in the previous have information values beneficial for forecasting future price variations.
However, it is problematic to catch studies that have empirically observed the association
between the being of long term reminiscence properties and the expectedness of future prices. To
examine such research, it is needed to establish a forecast model which can inspect the applied
relationship with the Hurst backer, which signifies a quantitative dimension of the degree of
competence. Such a forecast model should be based on the use of comparable price modification

patterns which are common mechanisms between weak form Market Efficiency and the Hurst
backer. Accordingly, it is used the nearest neighbor forecast (NN). The random walk model
(RWM) and efficient market (EM) are related closely. Hurst Backer being a French broker was
able to classify the random appeal of stock market prices and presented a theory with the name
of "The Theory of Speculation.
(Levin, 2008), conduct the research on the market efficiency and described that the work of
Market Efficiency with the latterly presented theories was not given prominence until 1950s
when some other work in the US marketplace were also showed and which authenticated work.
These studies designated that US stock market was next the random walk model and prices
enthused in the pattern clear by it. Author have developed the acclaimed theory of efficient
market and claimed the random walk model while Paul Samuelson providing the reputable proof
for Market Efficiency and also distinct the three known forms of market efficiency. The
increasing level of market activity and also to checker for association between information
publicly available and extra yields. The narrow minded and instant effects of information were
visible through daily data mined from the stock exchange. Information accessible affects in
different ways. If the marketplace was well-organized the result is understood the same day then
it may touch after one day, two days and three days. Author used 1) yields in stock market, 2)
irregular trading volume. In the procedure it have been used the Random Walk Model Test
Association Coefficient of Consecutive Returns and modes and logarithms and regression
analysis. The consequence was that news together had an effect and that can be both bad and
positive on stock market action in Pakistan. They also originate the day of the week patterns in
these relations. It have been under focused on: 1) the trading tactic of an early knowledgeable
agent, and; 2) the important effect of this method on informational efficiency of the stock
market. Author fundamentally formed a model and showed it in this broadside. It was originate
that insider interchange abridged informational efficiency of prices in the long run. The study on
Market Efficiency determined that although some improvements are made on the short term
foundation but on a lengthier term basis the procedure is less efficient. The differences
happening in the stock returns over period by comparing them with unqualified data. It have
been used sum of four sided breakdown and absorbed on monthly stock returns. The semi strong
form providing more reliable sign of time variation in monthly stock incomes than their weak
form exams and investigate the efficiency of the Chinese A-share and B-share markets and

inaugural of B-share markets for national owners. It been applied parametric and nonparametric
alteration ratio exams to the daily data of stocks over 1996 and 2005, the outcome was that Ashares are more effectual than B-shares, though the efficiency of both markets better quality next
the regulatory alteration. The timely data provided made them more well organized. Author
focused on role of Market Efficiency recompense that may cause wealth misallocation and
stockholder value obliteration in dissimilar firms having consequences on capital market. The
first amount of internal capital market competence was the industry attuned value added and the
second amount of efficiency was the comparative value added from interior capital allocation. It
was originate out that equity based inducements of Market Efficiency play an imperative role in
more efficient distribution of internal capital whether price bounds system moves stock market
efficiency. In a contrary way using continuing bi-correlation test number.
(Sogir Hossain Khandoker, 2011), have examine the stock markets from China, Korea and
Taiwan were considered to be support the price limits and the effect on the market efficiency
have been declared to be measured under the significant efficiency measure. The answers did not
provision that price limits was moving market efficiency in a depraved way. The CRS on their
complete sample of New York Stock Exchange firms and inspected mystifying effects that
incidence of stock market trading and secure size had on the connotation among liquidity and
market efficiency. The second impartial of their study was to validate that returns when predicted
designate market efficiency. Author have composed trading data from different stock markets
catalogue and protracted the sample period for an added last months they founded that
efficiency, validated with CRSs fallouts proved upgrading in market efficiency crossways tick
size governments is also observed for the residual firms on the New York Stock Exchange.
Information when obtainable in enormous numbers positively marks the wateriness and market
efficiency with the proposed model to know about the Market Efficiency. It allowing the
variance of the mistake term to differ over time. The efficiency of the markets was unbalanced
and was being pretentious by the synchronized crises and was also manipulating long term
effects of previous shocks. Author investigated whether the Euro and US dollar interchange rate
integrated with other chief exchange rates since the outline of the Euro. To examination cointegration, a vector error improvement model was used with Grangers Picture Theorem. In
adding it have been applied unit origin tests to the exchange rates and bi-variate co-integration
examination. The consequence was that after the overview of the Euro two co-integration

relations arose among the EuroUS dollar. They originate that free fluctuating exchange rates
were co-integrated after Euro. The link flanked by trade openness and the informational
efficiency of stock markets in stock markets of the different countries was used with panel
reversion. The study familiar a significant undesirable relation between trade honesty and stock
return. They settled that informational efficiency and trade directness which is related with
efficiency, designates future effectiveness. The key improvements in Shanghai stock market and
thus is chief magnetism for researchers to discovery out the markets form by means of the
progressing gap method and local Hurst backers to check the vacillations. It was being exposed
that the effectiveness of the Shanghai stock market improved due to Hurst exponents. The effect
of liquidness on the efficiency measured by the Hursts backer of the Thai Stock Market and
founded the result by means of the R/S technique could generate bogus long-range need, gave
the DFA method more dependable estimates of the Hursts proponent and there was a weak
association between market capitalization and the competence of the market and that the latter
was not meaningfully affected by the attendance of foreign investors.
(Tabassum Riaz, 2010), examine the study in the Pakistan stock market and stated that in
Pakistan there is an overall perception that high instability observed in the stock market is due to
insider trading by collusive brokers. Various studies in the respective field have empirically
documented that stock prices in Pakistan are worked by plotting stock brokers. To the degree that
manipulation surges volatility it will upsurge the participation cost of the stakeholders. This will
depress outside investors to partake in the market. They point out that such prices are one of the
issues, which can help solve the mystery of economic under-development. Author have further
recognize direct costs to include of large transfer of prosperity from strangers to inside wheelerdealers which is likely to inspiration the depth of the market and unfavorably affect its
intermediate role. To the extent that insider interchange affects stock market, it does not portend
well for the practicality of Market Efficiency in context of Pakistani stock market. The Feeble
Form of Efficient Market movements whether the existing security price has fully united all
information limited in the past prices. In this group, the market trading data such as old price and
exchange volume are stated to be accessible for everyone. It can be easily opened without
spending important cost. With the thought of this widely known past information therefore the
role of practical analysis will be unusable. Trying to inspect the overbought and oversold stocks
will be degenerative time base on this concept. If technical analysis advises people to buy hold or

sell positive security by witnessing the signal and trend line, the Weak Form of Effectual Market
believes that such signal will misplace its power since all savers will come up with the typical
results. When the data controls good signal about future illness, all people have already
intentional to exploit the signals so thus the purchasing signal will lead to the instant increase in
price. The like statement will also occur when the bad signal about forthcoming performance
comes and consequence in the immediate decrease in security price. Finally, the condition stated
in this theory indicates that it will be hard for folks to beat the market and earn anomalous return.
Difficult on the weak form market efficiency has been complete for years through numerous
methods.
(Mishra, 2009), had studied the Indian stock market and stated that in Indian Stock Market has
successfully bare the evidences of weak form market disorganization. Using serial association
and run assessment the investigator found non-random performance on daily index reappearance.
Recent study led in Indian Stock Market also ropes the finding of weak form market inefficiency
originate during the retro of 1987 until 1994. That research led in 2010 has bare that the stock
prices do not shadow the random walk and the being of important auto-correlation value has
disallowed the Efficient Market. Recent study to determine the indication of Weak Form of
Efficient Market is also showed in Pakistan Stock Market in the year of 2011. Using unit origin
test, run test and auto-regressive combined moving average, the study has shown the being of
return expectedness and rejected the weak form of market efficiency. On the other hand, a study
led on Kuala Lumpur Stock Exchange in 2003 gives dissimilar result. The study exposed that
during and after the disaster period, the Weak Form of Efficient Market is existed on the second
sheet of Kuala Lumpur Stock Exchange. The exploration on Kuala Lumpur Stock Exchange is
maintained by the discovery on Bahrain Stock Exchange in 2008. Using random walk method,
the study provides indications to support the Efficient Market. The outcomes show that
throughout the period till 2000, Bahrain Stock Exchange has been well-organized in a weak
form. Investigation on challenging the weak form of efficient market is also led in Indonesias
Stock Market. As well as the answers in several others emergent countries, the answers by local
researchers also give contentious results. The study led in 2001 bangs that the weak form of
well-organized market theory is applied on Jakarta Stock Exchange. The finding determines
evidences of accidental behavior and unimportant association coefficient among stock yields.
Moreover, recent study led in 2008 also transports the undistinguishable consequence. The study

attempts to scrutinize the weak form market efficiency by captivating daily closing price of stock
markets within context to industrial directories as samples. As an outcome, the study discoveries
that there is a significant auto-correlation on the outstanding value of substructure index while
others catalogues give the opposite outcome. That study clarifies that all observed directories
have followed the weak form market efficiency, excluding for the substructure.
(Tahir, 2011), had conducted the study on the stock market efficiency by taken into account the
market data and with the applicability of certain formula approaches towards the market data.
The study of the stock return making procedure has long been conquered by attention in its
random walk possessions. Justification for such notice is not hard to find, agreed that the
attendance or nonappearance of a random walk has significant implications for depositors and
trading policies, fund bosses and asset pricing mockups, capital markets and weak-form market
competence and so financial and fiscal development as a whole. Trading policies, for example,
differ when proceeds are categorized by random walks or by optimistic auto-correlation or
perseverance over short prospects and bad auto-correlation or mean return over long horizons. In
this example, as the asset horizon increases, an investor would invest additional in stocks if the
comparative risk dislike is better than agreement, than if the earnings were serially selfgoverning. Similarly, random walks in stock proceeds are critical to the preparation of rational
potentials replicas and the testing of weak form market efficiency. In an effectual market the
values of stocks fully join all pertinent information and hence stock revenues will display
random or random walk conduct. In stock prices not considered by a random walk the return
making process is subjugated by a temporary constituent and therefore future earnings can be
foretold by the historical sequence of yields. Finally, the aptitude of stock markets to play the
role that is frequently attributed to them attracting far-off investment, boosting national saving
and improving the valuing and availability of capital depends upon the company of random
walks. A marketplace following a random walk is steady with equity being suitably priced at an
equipoise level, whereas the absenteeism of a random walk infers alterations in the assessing of
capital and risk. This has significant implications for the distribution of capital within an
economical and hence overall financial expansion. Many of the state of conditions that involve
the emerging situations for the stock market and focus more on the investors to turn their
investment policies and amount by influence of the progress reports and the returns of the
companies. These returns tend to push the stock market data from upward to downward. The

investors are keen into the published reports and directly contact to the stock values for the
decision of investment. Many of the authors are keen into study for knowing the performances of
the corporations that are registered into the capital markets and forecast their future progresses.
(Jana Hanclova, 2006), did the work on the Dhaka stock exchange in instruction to find sign of
weak form of efficiency. Monthly returns data from 1988-1997 were occupied and after retaining
the run test, auto deterioration and autocorrelation test found the noteworthy autocorrelation at
unalike lags in the return series which directs that return series are not weak form efficient. The
weak-form efficiency mid the seven states of Gulf Cooperation Council (GCC) by using the
daily indices data ranging from 2001-06. The outcomes discard the hypothesis of weak form
efficiency and itemized that all seven realms stock market are not weak form efficient. The
Ghana Stock Exchange to magnet the signal on weak-form efficiency. Daily yields data from
1999-2004 was taken and after engaging the Random walk and GARCH model determined that
Ghana stock exchange is wasteful as it vetoed the hypothesis of weak form efficiency. The weak
form efficiency in the Damascus securities exchange by attractive the daily returns data from
2009-11 and quantified that stock prices do not tail random walk and hence the Damascus
securities exchange is not weak form efficient. Author deliberated the Bahrain stock exchange to
quantity the weak-form efficiency. The daily stock prices data as well as distinct sector data over
the period 1990-2000 was used and settled after engaging the econometric practice that Bahrain
stock exchange and distinct part both are weak form efficient (Tabassum Riaz, 2010). Author
worked on the weak form efficiency for the Shanghai and Shenzhen stock market and they
discovered that both stock markets are effectual in weak form and trail random walk pattern.
Author worked on weak form efficiency in Latin American countries stock. Daily returns data
were booked and by using the unit root tests and numerous variance ratio tests decided that stock
markets of all states are not weak-form efficient.
(Abdul Haque, 2011), checked the weak form efficiency of Karachi stock exchange by taken into
account the daily, weekly and monthly data for era of 6 years. The fallouts of the unit root and
numerous variance ratio tests confirmed that Karachi stock market is not weak-form efficient.
Author the weak form efficiency by taking the everyday data from June 2001 to December 2010
for Kuwait stock market. The fallouts of the unit root tests and Run test authorize the weak form
informational inadequacy for Kuwait equity market. Author used the returns data from national
stock exchange of India from 2008-09 and exposed that Indian stock market is weak form of

efficient for the respective period. Author confirmed the weak form efficiency by taken into
consideration both emergent and developed realms involves the India, Brazil, China and London
etc for sample period of 2007-12. After using the unit root tests and GARCH model it is open
that the stock markets of these kingdoms are not market efficient in its weak form. Authors
tested the weak form efficiency for Asia Pacific markets yields from January 2004 to December
2009. After using the unit root test, run test and adjustment ratio test it determined that all these
markets are not weak form efficient and hence do not shadow random walk. Authors tested the
market efficiency of Karachi stock exchange and originate that it is well-organized for the period
of 1991-2003. Authors tested the weak form efficiency for the stock market of Pakistan for
period 2001-10 and clinched after employing the unit root test, auto-correlation and run test of
haphazardness that Pakistan stock market is not weak form efficient and not pigeonholed by
random walk. Authors tested the weak form efficiency for the evolving markets from Europe and
for settled countries as well. ADF, PP and many variance ratio tests were busy and reported that
out of evolving market the hungry was the only one which realize the criteria of weak form
efficiency and in between developed markets the stock market of Sweden, Portugal, Germany,
United Kingdom and Ireland fulfill the state of affairs of weak form efficiency.
(Shea, 2012), stated that the Market Efficiency has an inspiration on the investment strategy of a
stakeholder because if stock markets are effectual trying to pick leaders will be a leftover of
time. Since in a well-organized market, the values of securities will imitate the markets best
estimate of their predictable return and risk taking into explanation all that is recognized about
them. So, there will be no underestimated stocks offering higher than merited expected returns,
given their danger. So, in an well-organized and efficiency of the market, an investment strategy
focused simply on the overall risk and return faces of the portfolio will be more serviceable. If
however, markets are not effectual, and excess returns can be completed by correctly picking
champions, then it will pay stockholders to spend time conclusion these underrated securities.
The day of the week consequence refers to the life of a pattern on the portion of stock yields,
whereby these proceeds are linked to the specific day of the week. Such association has been
proved mainly in the USA. The last exchange days of the week, mainly Friday are categorized by
the confident and considerably positive earnings, while Monday, the first exchange day of the
week, fluctuates from other days, even making negative earnings. Once o'er the day of the week
effect in emergent stock market have not been widely researched. The company of such an effect

would unkind that equity incomes are not autonomous of the day of the week, a sign against
random walk theory. Studies on testing of market efficiency of Asian emerging stock markets are
also surprisingly few. There is no sign that the stock prices in chief Asian Markets and U.S.
marketplaces are weak form efficient independently and together in the long run. The indication
of market efficiency in Nairobi Stock Exchange involves the small market such as Nairobi Stock
Exchange delivers empirical results reliable with weak form efficiency. The disorganization of
stock markets of Korea and Taiwan on the basis of weak hypothetical form of Capital Asset
Pricing Prototypical in both the marketplaces have lead weak and semi-strong efficacy tests of
Australian stock market by using combined share price indexes and find the data steady with the
weak form effectiveness. The periodic pattern in instability of Asian Stock Markets. Using
Levine test, they bang that there exist day of the week differences in unpredictability in most of
the emergent Asian markets. The tests on the weak form market efficiency of the Kuala Lumpur
Stock Exchange and accomplishes that the stock exchange showed a surprisingly high grade
efficiency, in spite of delicacy of the market. Globally, stock markets play noteworthy role for
investors, concerns and serve as a tool for enhanced growth. The equity market delivers investors
and businesspersons with an exit approach. This is vital especially to venture capital moneys as it
gives potential shareholders an opportunity to recover their investments finished an initial public
offering. Base on the Market Efficiency model, an individual shareholder do not have a gain in
predicting a profit on a stock rate due to the fact that no specific has access to material not
already available to everybody else.
(Nikunj R. Patel, 2012), examine the market efficiency in different Asian stock markets. The
Ghana Stock Market been the main stock exchange in Ghana was combined and started its
trading with twelve listed businesses and government. Securities on the GSE comprise equities,
corporate and government bonds. Currently there are thirty six listed corporations on the GSE,
one with favored stock i.e. Standard Chartered Bank and two business bonds. The market
capitalization for the first two years of its beginning was 4.2 billion in 1993 and 47.35 billion in
2011. The GSE All share index and the Database Stock Index are the chief indices for the stock
exchange. In totaling to these indices, Tactical African Securities Limited has also available SAS
Index, SAS engineering Index and SAS financial Index for the conversation. There are several
key sectors of the reduced listed on the Stock exchange. These take in oil, banking, industrial
firms, mining and preparing in the Ghana Stock Exchange twelve-monthly report. Due to the

GSEs vivacious role in rising domestic and global capital for economic expansion, recent
reforms have attentive on enhancing recognized development. The market also helps as capital
arrivals for both as this is the lowermost level effectiveness and resolved that prices of financial
resources fully reflect all available information confined in past prices, volume operated and
short notice. This form of effectiveness infers that antique prices and volume imported cannot be
used to predict imminent price movements. Studying the presence of any statistically weighty
dependence with auto-correlation or price turns or any identifiable trend in share charges
changes, is customarily used to directly test weak form efficiency. Weak form tests are copious
in terms of both regularity and research target and the fallouts mainly support weak form
efficiency. In certain cases, statistically momentous dependence in arrival series has been found
but authors and many of the field researchers upholds that some of the requirement is steady with
the fair game model and the respite does not appear to be enough to announce market
unproductive. In any case, most of the revenue chances presented by the trends tend to fall gone
when business costs are taken into explanation.

Thus, there are empirical evidences in

sustenance of the weak form of the competent market. Stock price undertaking does not give
shareholders any evidence that permits them to shattered and unassuming buy and hold
investment stratagem. Market efficiency and Random walk are two financial outsets with rather
closed association. They have been two hot topics since 60th in the last era. Until now there still
exist countless different positions to the models. With esteem to the market efficiency model,
there are different lookouts about whether or not a marketplace can be named to be efficient or
unproductive and how to test and magistrate the market efficiency features. Usually this is the so
baptized Efficient Market difficulties. Though this premise has never been truly specialized since
the start comes out, many modern concepts and studies are advanced based on this start.

(Mirah Putu Nikita, 2012), determines that the Market efficiency has been the dominant start of
the commercial markets. Efficient Market Hypothesis is the impression that market prices join all
information rationally and promptly. The term of Efficient Market Hypothesis can be explained
by an exemplary viz. Fair game model. Rendering to fair game model, in an effectual market, on
an average there is no change between definite price changes and predictable price changes. In
both developing and advanced economies, capital market has been gotten as the main vehicle of
financial growth. Among numerous other roles it performs the central role of channelizing

savings into speculation. Thus, capital market plays an essential role in the provision of monetary
resources into the industrious activities of the economy. This provision takes place through the
fitting pricing of refuges traded in the bazaar. The investors can be driven to save and invest in
the capital market of a nation only if the securities in the market are correctly. A capital market
in which share prices fully imitate all the existing information is called effective. In fact, the
information and its broadcasting determine the efficacy of a capital market. That is, how fast and
correctly the security fees reflect these material show the degree of effectiveness of the capital
market. Consequently, capital market being a vital institute that facilitates economic progress,
the efficiency of capital market is a matter of notice to many gatherings. In recent years,
particularly in the aftermath of the global fiscal collapse, the training of the weak form capital
market efficiency has concerned the attention of academics, economists and fiscal analysts. It is
careful that more efficient and better working capital markets could offer greater push to internal
economic growth. Market efficiency refers to a state in which current asset prices reflect all the
publicly available information about the stock. The acknowledged view is that when info arises
the news banquets very quickly and is unified into the prices of stock without delay. Under such
a complaint, the current market price in any economic market could be the best dispassionate
guess of the value of the speculation. Thus, efficient market hypothesis implies that old info
cannot be used to anticipate future price actions. So, neither technical study, which is the study
of historical stock values in an effort to predict future prices nor level central analysis, which is
the study of financial gen such as company salaries, asset morals, etc., to help shareholders select
unappreciated pillories, would enable an depositor to achieve profits greater than those that
could be gained by holding a randomly selected selection of individual stocks with analogous
risk.If market prices provide a valid standard of performance, then policies driven by market
effectiveness, earnings administrations and economic asset mispricing will not be value
attractive.
(Keasey, 2000), stated that in the finance prose author classified the market efficiency into three
stages as per showed in the prior sections of current study. Weak form market efficiency
instructs that no one can tired the market using info that everyone else distinguishes. Going one
step fast, semi strong form marketplace efficiency situations that a companys monetary
statements, declarations, economic factors and other like information are of no help in projecting
future price movements and fortifying high investment returns. Similarly, strong form market

effectiveness holds that past publicly as well as privately held material or insider information too
is so fast incorporated by market prices, these cannot be used to make additional trading returns.
Capital market efficiency has imperative implications for investors and governing the ruling
classes. In efficient capital markets, the role of supervisory authorities is limited as stocks are
accurately assessed. There will be no underestimated assets offering higher than probable return,
or overestimated assets offering lower than the probable return. All assets will be appropriately
priced in the market contribution optimal reward to jeopardy. Thus, in an efficient market a top
investment approach will be to focus on risk and return faces of the asset and/or selection. If, on
the other hand, a market is not effectual, the regulatory the ruling classes can take required steps
to certify that stocks are correctly priced chief to capital market efficiency. In an ineffective
market, a depositor will be better off trying to spot champions and losers in the market, and
correct identification of miss priced assets will increase the overall routine of the portfolio. By
looking at the position of capital market efficiency, many of the authors are in an attempt to
explore the validity of weak form efficacy for select emergent and developed capital markets.
Conventionally, more developed capital markets are painstaking to be more effectual. But the
recent international financial crisis happens to dent such efficiency and thus authors have strove
to revisit the issue in the background of select settled capital market. On the other hand, as it is
thought that the understanding of productivity of the evolving markets is important as a value of
integration with developed markets and free program of moneys across national boundaries.
Since early 1990s, most of the developed nations have announced the idea of liberalization and
globalization in their financial prudence that likely to lead to sustained reforms in the financial
sector and augmented efficiency of capital markets. So it is domineering to reinvestigate the
efficient market hypothesis in the background of select evolving market economies. Hence,
different countries such as Brazil, Russia and Sri Lanka amongst emergent parsimonies and US,
Germany and UK among the developed thrifts have been considered for exploratory the market
effectiveness for a period 2007-10. It is with this detached the rest of the studies and the
researches are organized. The various information collected from the analysis and precious
studies on the market efficiency receive the observation that there is no expectedness of the
assets and they are assessed.
(Desmond Tutu Ayentimi, 2013), determined many financial models in current finance are
grounded on this market efficiency thought such as stock market efficiency is the concept of

the above answers from industrialized markets data. The debate is produced by this market
efficiency idea in the form of monthly effect, day of the week effect etc in equity values
through the addition of different opinions on capital market regarding the strong fiscal concept.
The affiliation between information and market prices is correlated to informational proficiency.
Authors also pigeon-holed the market productivity into type of market efficiency on the source
of their level of information efficiency. The market efficiency plays an imperative role for the
investors in questioning and managing the stock portfolios. In financial markets there should be
effectiveness because it has plentiful effect on the rational result making of the investors as they
react very speedily to the gen released. The acts of the stock market are normally contrasted to
the meanings in gambling dens by the stockholders and they look for the right blend and
appealing strategies through the execution of numerous investment policies. So actually the
search of the weak form of efficiency is for the taxing of procedural analysis for costeffectiveness or for the calculation purpose. Much of the research linked to the market efficiency has
been led in the developed markets but there are not too many instructions on market efficiency in order to
face the stock prices behavior in unindustrialized or emerging states and especially in Pakistan stock
market. Now movement is loosened toward emerging thrifts to analyze the weak form efficiency of their
stock markets, largely with deference to the valuable involvement of efficient capital market to the
economic and financial growth as well as progress. The dispassionate behind is to consider the weak form
efficiency of Pakistan stock markets. The environment of Pakistan is especially more unstable such as
security threats, extremism, inflation, energy calamities and many more other difficulties are prevailed
shifting the thinking pattern of investors associated to the investment decisions. So this study will provide
a tool to stockholders in order to make apposite investment strategies by make out the stock prices
behavior and likelihood element in term of weak form productivity.

Hamid, et. al. (2010) conducted a study named Testing the Weak form of Efficient Market
Hypothesis: Empirical Evidence from Asia-Pacific Markets to test the weak-form market
efficiency of the stock market returns of Australia, China, Hong Kong, India, Indonesia, Japan,
Korea, Malaysia, Pakistan, Philippine, Singapore, Sri Lanka, Taiwan, and Thailand. Form the
period of January 2004 to December 2009 monthly observations were taken and to test the
hypothesis of random walk Autocorrelation, Ljung-Box Q-statistic Test, Runs Test, Unit Root
Test and the Variance Ratio were used. Jarque-Bera test was used to verify the normal
distribution and results showed that for all countries data was negatively skewed. It was revealed

by applying unit root test that data series become stationary. Autocorrelation, Variance Ratio and
Ljung-Box QStatistic tests indicated that none of market was weak form efficient and investors
of these countries can get benefits from arbitrage due to inefficiency of their markets.
Awad and Daraghma (2009) examined the weak form of efficiency on the Palestine Security
Exchange (PSE) by using daily observations of PSE from 1st of January 1998 to the end October
2008. Parametric tests which include serial correlation test, and Augmented Dickey-Fuller
(ADF) unit root tests and nonparametric tests which include runs test, and Phillips-Peron (PP)
unit root test were used. Nonparametric tests were used to investigate the efficiency of the PSE at
the weak level particularly; Jarque-Bera test for normality results exposed that the daily returns
of the PSE were not normally distributed. The runs tests and serial correlation tests both shown
that the daily returns are not efficient at the weak-form level and the unit root tests (Augmented
Dickey-Fuller and Phillips-Peron) proposed weak-form inefficiency in the return series. The
evidences showed that PSE is not efficient in weak form.
Basu (1977) conducted a study named investment performance on common stock in relation of
price-earnings ratios: A test of the efficient market hypothesis. In his paper he determined
whether the investment performance of common stocks is related to their P/E ratios. Data was
taken over 1400 industrial firms which traded on NYSE from September 1956 to august 1971.
For the given period two or more securities portfolios which had similar P/E ratio was
constructed. Relationships of Risk-return were compared and then their performance was
evaluated. Lastly as test of efficient market hypothesis, returns of low P/E ratio and randomly
selected portfolios with equal risk were compared. Results showed that over the particular period
behavior of security prices was not explained completely by efficient market hypothesis. On risk
adjusted basis portfolios with low P/E earned superior returns, proposition of price ratio
hypothesis on the relationship between investment performance of equity securities and their P/E
ratios seems to be valid.
Gupta and Basu (2007) in their research paper Weak Form Efficiency in Indian Stock Markets
tested the weak form of efficiency in context of random walk hypothesis of the two major
markets BSE and NSE in India. For BSE daily closing prices from the period May 24, May 26,
1996 and for NSE daily closing prices from May 27, 1996 to May 26, 2006 were taken. Unit root
(augmented Dickey-Fuller), Phillip-Perron test and KPSS test were used to analyses data. As the

unit root test value was more negative than critical value and KPSS and Phillip-Perron test also
confirmed series to be stationary, so these evidences proposed that series did not follow random
walk model and autocorrelation exist in both markets that reject the weak form efficiency
hypothesis.

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