Weak-form market efficiency in Asian emerging and developed equity markets: Comparative tests of random walk behaviour

Abstract

This paper examines the weak-form market efficiency of Asian equity markets. Daily returns for ten emerging (China, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines, Sri Lanka, Taiwan and Thailand) and five developed markets (Australia, Hong Kong, Japan, New Zealand and Singapore) are examined for random walks using serial correlation coefficient and runs tests, Augmented Dickey-Fuller, Phillips-Perron and Kwiatkowski, Phillips, Schmidt and Shin unit root tests and multiple variance ratio tests. The results, which are in broad agreement across the approaches employed, indicate that none of the emerging markets are characterised by random walks and hence are not weak-form efficient, while only developed markets in Hong Kong, New Zealand and Japan are consistent with the most stringent random walk criteria.