Do Asian Stock Market Prices Follow Random Walk? A Revisit

Authors

  • Kian-Ping Lim Labuan School of International Business and Finance Universiti Malaysia Sabah, Malaysia
  • Muzafar Shah Habibullah Faculty of Economics and Management Universiti Putra Malaysia, Malaysia
  • Hock-Ann Lee Labuan School of International Business and Finance Universiti Malaysia Sabah, Malaysia

DOI:

https://doi.org/10.32890/ijms2004.11.7

Keywords:

Random walk, weak-form efficiency, BDS test, Asian Stock Markets

Abstract

This study re-examines the price behaviour of Asian stock markets in light of the random walk hypothesis. With a new statistical tool, namely the Brock- Dechert-Scheinkman (BDS) test, it is possible for researchers to detect more complex form of dependencies in series of financial returns that often appear completely random to standard statistical tests, such as serial correlation tests, runs test, variance ratio test and unit root tests. Our results suggest that all the returns series in general do not follow a random walk process. This conclusion holds in both sub-periods (pre- and post-crisis) for Bangkok S.E.T. (BSET), Jakarta SE Composite (JSE), Kuala Lumpur SE Composite (KLSE), Korea SE Composite (KSE), and the Philippines SE Composite (PSE). For Hong Kong Hang-Seng (HKHS), the empirical results support our conjecture that the Asian financial crisis in 1997 adversely affected the market's ability to price stocks efficiently, thus preventing stock prices from following a random walk process. In particular, the price behaviour of this market experienced a dramatic change from random walk in the pre-crisis period to non-random during the crisis.

 

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Published

25-02-2004

Issue

Vol. 11 (2004): International Journal of Management Studies (IJMS) Vol. 11, Special Issue, February 2004

Section

Articles

Research impact

Harvested 2026-09-08
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Identifiers DOI 10.32890/ijms2004.11.7 OpenAlex W29676649

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