Get Weak Form Efficiency

Tests of weak form efficiency in stock returns are performed pre- dominantly under the null hypothesis of independence or a martingale difference property. These properties rule out higher forms of dependence that may exist in stock returns that are otherwise serially uncorrelated.

Weak form of EMH is tested using the Kolmogorov-Smirnov goodness of fit test, run test and autocorrelation test. The K-S test result concludes that in general the stock price movement does not follow random walk. The results of the runs test reveals that share prices of seven companies do not follow random walk.

Weak form of EMH is tested using the Kolmogorov-Smirnov goodness of fit test, run test and autocorrelation test. The K-S test result concludes that in general the stock price movement does not follow random walk. The results of the runs test reveals that share prices of seven companies do not follow random walk.

Efficient Market Theory: Empirical Test # 1. This means that the investor who develops the stingy based on past prices and chooses his portfolio on that basis cannot continuously outperform another investor who 'buys and holds' his investments over a long-term period.

The main empirical test methods for Weak-form efficiency market hypothesis can be divided into two categories: one is to test the randomness of stock prices; the other is to test the invalidity of technical analysis, which testing the predictability of earnings.

The Efficient Market Hypothesis helps justify why investors choose passive investing strategies. The Efficient Market Hypothesis has three forms: week, semi-strong, and strong. The Efficient Market Hypothesis assumes asset prices reflect all information available.

Three common types of market efficiency are allocative, operational and informational. However, other kinds of market efficiency are also recognised. Arbitrage involves taking advantage of price similarities of financial instruments between 2 or more markets by trading to generate profits.

Weak form efficiency, also known as the random walk theory, states that future securities' prices are random and not influenced by past events. Advocates of weak form efficiency believe all current information is reflected in stock prices and past information has no relationship with current market prices.