Weak Form Efficiency

Weak Form Efficiency

A version of the efficient markets theory on how markets work. It holds that the market efficiently deals with most information on a given security and reflects it in the price immediately. Specifically, weak form efficiency states that technical analysis is ineffective and that prices are on a random walk. Investors and academics disagree on how well the model works, but it is less controversial than the semi-strong form of the EMT and the strong form of the EMT.
References in periodicals archive ?
Daskalakis and Markellos (2008) examined the efficiency of the European market for carbon dioxide emission allowances and found that the behavior of the markets under consideration is not consistent with the weak form efficiency.
Evidence on weak form efficiency and day of the week effect in the Indian stock market".
Testing Weak Form Efficiency for India Stock Markets.
TESTING THE WEAK FORM EFFICIENCY ON THE ROMANIAN CAPITAL MARKET
In emerging markets Wong and Kwong (1984) used the runs test to examine the weak form efficiency in the Hong Kong stock market and concluded that it is inefficient.
Weak form efficiency exists when security prices reflect all the information contained in the history of past prices and returns.
The results of nonlinear unit root tests indicated that only Bulgarian, Czech, Hungarian and Slovakian price series contain unit root, consistent with weak form efficiency.
Numerous studies (Fama, 1965; Alexander, 1961; Fama and Blume, 1966; Granger and Morgenstern, 1970) support the random walk theory in support of weak form efficiency.
If these alphas persist over time and investors can use the information in the past returns of the funds to form strategies that deliver value added performance, this speaks to weak form efficiency.
No odds category has a positive return, a result consistent with weak form efficiency.
The earlier studies on testing weak form efficiency started in the developed market.
Poshakwale (1996) found that the prices on BSE did not follow random walk by studying weak form efficiency and the day of the week effect on the Bombay Stock Exchange and the distribution was not normally distributed.