ROLE OF HURST EXPONENT IN PREDICTION OF MARKET EFFICIENCY IN KSE-100 INDEX
Download| Volume 11 Issue 2 2015 | |
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| Author(s): |
Syeda Tayyaba Ijaz
Rabia Komal
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| Abstract | This paper aims to investigate the Efficient Market Hypothesis (EMH) and validity of the Random Walk Model (RWM) in the KSE-100 index starting from 1992 till 2014 taking monthly averages of the index. The main focus of the paper is to evaluate the efficiency in the KSE-100 index concerning the application of Hurst Exponent and Rescaled Ranged Statistics. Although many researchers have previously explained the working of EMH in the KSE-100 index rarely anyone has explained it using Hurst Exponent Analysis overall longest period since the establishment of KSE-100 index Feb 1992 to Dec 2014. Annual Rescaled Range Statistics are also calculated to explain the good or bad years according to Estimated Hurst Statistics. All statistical analysis has been performed on Gretl which gives a good grasp over Hurst Exponent Analysis. The results revealed that the overall KSE-100 index is not following the random walk and is not performing efficiently, and yearly break up shows that the market was persistent in few years but mostly it was antipersistent (long-run memory prevails). Implementing Hurst Exponent Analysis enabled us to get rigorous results about the performance of the Pakistan stock market in terms of efficiency that implied chances of arbitrage opportunity prevail significantly. |
| Keywords | : Efficient Market hypothesis, Random Walk, KSE-100 index, Hurst Exponent Analysis, De-trended Functional Analysis |
| Year | 2015 |
| Volume | 11 |
| Issue | 2 |
| Type | Short Report |
| Recognized by | Higher Education Commission of Pakistan, HEC | Category | "Y" | Journal Name | IBT Journal of Business Studies | Publisher Name | ILMA University | Jel Classification | - | DOI | http://dx.doi.org/10.46745/ilma.jbs.2015.11.02.04 | ISSN no (E, Electronic) | 2409-6520 | ISSN no (P, Print) | 2416-8393 | Country | Pakistan | City | Karachi | Institution Type | University | Journal Type | Open Access | Manuscript Processing | Blind Peer Reviewed | Format | Paper Link | http://ibtjbs.ilmauniversity.edu.pk/journal/jbs/11.2/4.%20Role%20of%20Hurst%20Exponent%20in%20Prediction%20of%20Market%20Efficiency%20in%20KSE-100%20Index.pdf | Page | 41-54 |