Volume 11 Issue 2 2015


Syeda Tayyaba Ijaz
Department of Business Administration, International Islamic University Islamabad.

Rabia Komal
Pakistan Institute of Development Economics (PIDE), Islamabad.

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 -
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 PDF
Paper Link
Page 41-54