Testing the Empirics of Weak Form of Efficient Market Hypothesis : Evidence from Asia-Pacific Markets

The present study examines the weak form of market efficiency of 10 selected stock exchanges in Asia-Pacific markets for daily, weekly and monthly returns from 1997 to 2012. The descriptive statistics results indicate that all the three return series (daily, weekly and monthly) are not normally distributed and are characterized as leptokurtic and skewed. The results of run test and autocorrelation indicate that the Asian markets are weak form efficient when tested on monthly returns but fail to exhibit characteristics of random walk in daily and weekly returns. The results of unit root conclude that data becomes stationary at order I(1) and the results of the more stringent variance ratio reject the existence of weak form of inefficiency in the selected stock indices. The results have important implications for investors who can exploit market inefficiency and earn abnormal profits while holding a well diversified portfolio in these emerging markets