Abstract:
Random walk hypothesis state the prices move randomly
and the past prices are not helpful i n predicting future
prices . Many researches so far have been conducted to prove
that hypothesis using different models and approaches . The
results of these studies are contradictory. Some authors
have proved that prices follow random walk while some
authors have opposite opinion.
In order to prove that hypothesis , in this paper
Karachi stock exchange 100 index has been analyzed for
random walk during July-1994 to July-2004. The index has
been tested for normality , autocorrelation using Qstatistic
& Dickey-Fuller test . The results support that
KSe-100 index follow random walk i n both weekly and monthly
return series.
Because the nature o f stock price movement is complex
there fore it has been recommended that new study could be
undertaken that should also incorporate t he dividends and
s tock spit impact on the returns , and random walk
hypothesis can be retested using more powe rful models like
variance ratio test.
