Weak-form efficiency

Weak-form efficiency

A pricing theory that the price of a security reflects the past price and trading history of the security. Theory implies that security prices follow a random walk. Related: Semistrong-form efficiency, strong-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 ?
(a) The Augmented Dickey-Fuller (ADF) test was selected to test for the existence of weak-form efficiency in the selected East Asian region.
A recent study by Palamalai & Kalaivani (2015) does conduct tests of weak-form efficiency for Indian sectoral indices, but in contrast to the aforementioned study, which tests for serial correlation and any departures from a random walk using autocorrelation, unit root, variance ratio, and the runs tests, the present work employs fractional integration models to check for the presence of long-range dependence or memory in the series.
These three versions are known as (i) weak-form efficiency, (ii) semi-strong form efficiency and (iii) strong-form efficiency.
Weak-form efficiency in the Nigerian Stock Exchange.
In order to test the weak-form efficiency of the Romanian capital market and different aspects regarding the behavior of financial assets, we have used daily closing prices for the BET Index, for the period starting from the 22th of September, 1997, and ending to the 10th of July, 2015.
The article "Malaysian finance sector weak-form efficiency: Heterogeneity, structural breaks, and cross-sectional dependence" attempts to test weak form efficiency of the banking system in Malaysia from a sample data that runs from 1994-2014.
Emerging markets also exhibited weak-form efficiency. In Singapore (Hong, 1978), Malaysia (Barnes, 1986), and Greece (Panas, 1990).
Frimpong, J.M., Abaiye, E.F.O., 2007, "Market Returns and Weak-Form Efficiency: the case of the Ghana Stock Exchange", Munich Personal RePEc Archive,
This is a condition required for a set of survey expectational series to meet the term of weak-form efficiency. This property can be examined based on Mullineaux (1978) framework by estimating the following Equation (9):
Their findings indicate that stock markets in Mauritius and Morocco may be efficient while the stock markets in Mauritius and Morocco, Botswana, Ghana, Ivory Coast, and Swaziland are not consistent with weak-form efficiency. The application of the EGARCH model enabled them to capture how conditional volatility affects the pricing process without imposing undue restrictions on the parameters of the conditional variance equation.
Analysis of Weak-Form Efficiency on the Nigerian Stock Market: Further Evidence from GARCH Model.
Weak-form efficiency occurs when past stock prices cannot be used to predict future stock prices (Magnusson and Wydick, 2002).