Market Efficiency: An Empirical Analysis of KSE 100 Index

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Market Efficiency: An Empirical Analysis of KSE 100 Index
Haroon Mahmood
(Shaheed Zulfikar Ali Bhutto Institute of Science and Technology) Dr. Kashif ur Rehman
Iqra University

In an efficient market, the actions of the many competing participants, leads to actual prices already reflecting the effects of current information and the actual price of a security to wander randomly about its intrinsic value. The fact that the market is efficient is important for the public economy when it comes to the distribution of scarce resources as it acts as an intermediary of capital distribution from savers to investors through the mechanism of price. In
Pakistan, securities market has a special
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He determined the unpredictability of the changes of prices of
French government papers. He also concluded that " The calculated anticipation of the investor is of no value" . Holbrook (1934), has found that the subsequent changes in stock prices are not dependent on each other and are also uncorrelated and he concluded that they are random. Later, many of the researchers [Kendall
(1953), Osborne (1959), Fama (1965)]have supported the findings of Holbrook. These studies used the statistical techniques to test the independence of stock price. The Efficient
Market Hypothesis was established by many researchers in the past over the time span of more than thirty years [Raaschou & Segell
(1998), Fama & French (1996), McQueen, et. al,
(1996), Ikenberry, et. al,(1995), Malkiel (1995),
Brown & Goetzmann (1995), Goetzmann &
Ibbotson (1994), Jegadeesh & Titman (1993),
Elton, et. al,(1993), Chopra, et. al,(1992), Seppi
(1992), Lee, et. al,(1991), Bernard & Thomas
(1990), Harris (1989), Ippolito (1989), Shevlin et. al,(1984), Charest (1978), Moore (1964)]. It cannot be denied that several researches in the past have not supported the random walk hypothesis, i.e. they found the signal of predictable elements in stock returns. Most of

this work was done on the largest stock markets of the world, which include the U. S. stock
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