TESTING THE EFFICIENCY OF PAKISTANI STOCK MARKET (PSX): A CASE OF KSE-100 INDEX

Mazhar Farid Chishti; Ali Farhan Chaudhry; Ambreen Afzal

Mazhar Farid Chishti Senior Lecturer, Lahore Garrison University, Lahore, Pakistan
Ali Farhan Chaudhry Assistant Professor, Institute of Management Science, Lahore, Pakistan
Ambreen Afzal Lecturer, Lahore Garrison University, Lahore, Pakistan

Keywords: Karachi Stock Exchange, Random Walk Theory, Efficient Market Hypothesis

Abstract

This empirical study examines weak form efficiency of Pakistani stock market by employing Augmented Dickey and Fuller (1979), Phillip-Perron (1988) and Kwiatkowski, Phillips, Schmidt, and Shin (1992) unit root tests for random walk and Ljung-Box Q-Statistic of autocorrelation. Pakistan stock market is proxied by KSE-100 index daily closing prices for the period of January 3, 2000 to March 31, 2016. Empirical results of 4259 observations determine that KSE-100 index does not follow a random walk rather stocks follow a systematic patterns which translate into abnormal returns. All these are considered by various analysts as the most crucial factors in the context of weak efficiency of Pakistani stock market. The Pakistani stock market is informational weak form inefficiency due to one or another reasons. For this purpose, the current study is an attempt to investigate certain factors which are responsible to bring variations in this regard.