Open AccessPredictability of Stock Returns on the Dhaka Stock Exchange
Author(s) -
Yub Raj Dhungana
Publication year - 2020
Publication title -
the batuk
Language(s) - English
Resource type - Journals
eISSN - 2565-4934
pISSN - 2392-4802
DOI - 10.3126/batuk.v6i2.34519
Subject(s) - predictability , econometrics , autocorrelation , stock (firearms) , stock exchange , random walk hypothesis , random walk , economics , efficient market hypothesis , stock market index , stock market , statistics , statistical hypothesis testing , mathematics , financial economics , geography , finance , context (archaeology) , archaeology
The study examines the predictability of index returns on the Dhaka stock market within the framework of the weak-form efficient market hypothesis using historical daily returns for a period of 1st June, 2014 to 29th May, 2020. The Jarque-Bera statistics test explored the return distribution of Dhaka Stock Exchange is non-normal. The random walk hypothesis (RWH) was tested using autocorrelation test, runs test, unit root tests(Augmented Dickey-Fuller (ADF) and, Phillip-Perron (PP) test) and variance ratio test. The results explored that all tests rejected the random walk hypothesis required by the weak-form efficient market hypothesis. This provides empirical basis to infer that the DSE is inefficient at weak-form and stock return can be predicted. The rejection of the RWH on a daily basis is possibly an indication that the weak-form inefficient characteristic of the DSE is not sensitive to return frequency.