Lecturer, Public Youth Campus, Tribhuvan University, Nepal
The paper examines random-walk behaviour and weak-form market efficiency on daily market returns of All Share Price Index (ASPI) and Sensitive Index (SI) on the Nepal Stock Exchange (NEPSE) using Lo and MacKinlay’s (1988) variance-ratio tests and runs tests for the period between September 13, 2006 to May 13, 2010. The study finds that the random-walk hypothesis is strongly rejected for both indices. There is no evidence for weak-form efficiency in either series. It implicates that market participants have opportunities to predict future price and earn abnormal returns from the Nepalese stock market.
Market efficiency, Random walk hypothesis, Runs tests, Variance ratio test
