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Is Dhaka Stock Exchange (DSE) Efficient? A Comparison of Efficiency before and after the Market Crisis of 2010


Affiliations
1 Post Graduate Research Studies, University of Western Sydney, Australia
2 South Asia Region Financial Management, World Bank, Bangladesh
3 Department of Business Administration, East West University, Bangladesh
 

This paper tests for the weak form of efficiency in DSE. A major objective of this paper is to compare and analyse the efficiency of the market before and after the market crash of December,2010. The sample includes DSEGEN price index daily closing values. The data is divided among two time periods, year 2009-2010 is used to test the efficiency before the market crash and 2011-2012 is used to test the efficiency after the market crash. Kolmogorov-Smirnov and the Shaprio-Wilk tests are used to test the normality of returns and for both the time periods, the returns distributions are non normal. Runs test is used to test for the randomness of returns. The result of runs test is quite interesting. It shows that returns were not random before the market crash. Numerous other previous researches also show non randomness of returns in DSE. But surprisingly random walk is observed for the returns after the market crash. It requires further studies to understand such abnormality.

Keywords

Efficient Market Hypothesis, DSE, Random Walk Model, Weak Form of Efficiency.
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  • Is Dhaka Stock Exchange (DSE) Efficient? A Comparison of Efficiency before and after the Market Crisis of 2010

Abstract Views: 235  |  PDF Views: 102

Authors

Maruf Rahman Maxim
Post Graduate Research Studies, University of Western Sydney, Australia
Tasfia Awal Miti
South Asia Region Financial Management, World Bank, Bangladesh
S. M. Arifuzzaman
Department of Business Administration, East West University, Bangladesh

Abstract


This paper tests for the weak form of efficiency in DSE. A major objective of this paper is to compare and analyse the efficiency of the market before and after the market crash of December,2010. The sample includes DSEGEN price index daily closing values. The data is divided among two time periods, year 2009-2010 is used to test the efficiency before the market crash and 2011-2012 is used to test the efficiency after the market crash. Kolmogorov-Smirnov and the Shaprio-Wilk tests are used to test the normality of returns and for both the time periods, the returns distributions are non normal. Runs test is used to test for the randomness of returns. The result of runs test is quite interesting. It shows that returns were not random before the market crash. Numerous other previous researches also show non randomness of returns in DSE. But surprisingly random walk is observed for the returns after the market crash. It requires further studies to understand such abnormality.

Keywords


Efficient Market Hypothesis, DSE, Random Walk Model, Weak Form of Efficiency.