Open AccessTesting for Market Efficiency in Emerging Markets: A Case Study of the Karachi Stock Market
Author(s) -
Khalid Mustafav,
Mohammedv Nishat
Publication year - 2007
Publication title -
the lahore journal of economics
Language(s) - English
Resource type - Journals
eISSN - 1811-5446
pISSN - 1811-5438
DOI - 10.35536/lje.2007.v12.i1.a6
Subject(s) - stock exchange , economics , stock (firearms) , stock market , econometrics , market efficiency , financial economics , finance , geography , context (archaeology) , archaeology
This paper investigates the efficiency of the Karachi stock exchange(KSE) with corrections for thin trading and non-linearity as suggested byMiller, Muthuswamy and Whaley (1994). Daily, weekly, and monthly dataon stock prices from December 1991 to May 2003 have been used, withthree non-overlapping periods (December 1991 to May 1998; May 1998 toSeptember 2001; and September 2001 to May 2003) and one combinedperiod (May 1998 to May 2003). The results indicate that the KarachiStock Market is efficient for the overall period, the three sub-periods, andthe combined period in linear and non-linear behavior after makingadjustments for thin trading. The same result is observed when theefficiency test is conducted on weekly and monthly data after adjusting forthin trading during the overall study period.