Predictability of Stock Returns on the Dhaka Stock Exchange

Authors

  • Yub Raj Dhungana Tribhuvan University

DOI:

https://doi.org/10.3126/batuk.v6i2.34519

Keywords:

weak-form efficiency, random walk, Dhaka Stock Exchange, index returns, autocorrelation test, unit root tests, variance ratio test

Abstract

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.

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Author Biography

Yub Raj Dhungana, Tribhuvan University

Associate Professor

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Published

2020-07-01

How to Cite

Dhungana, Y. R. (2020). Predictability of Stock Returns on the Dhaka Stock Exchange. The Batuk, 6(2), 87–96. https://doi.org/10.3126/batuk.v6i2.34519

Issue

Section

Research Articles