Tests of the random walk hypothesis for equity markets: evidence from China, Hong Kong and Singapore

Abstract

This study tests the random walk hypothesis for China, Hong Kong and Singapore. Using variance ratio tests, robust to heteroskedasticity and employing a recently developed bootstrap technique to customize percentiles for inference purposes it is found that Class A shares for Chinese stock exchanges and the Hong Kong equity markets are weak form efficient. However, Singapore and Class B shares for Chinese stock exchanges do not follow the random walk hypothesis, which suggests that liquidity and market capitalization may play a role in explaining results of weak form efficiency tests.

Notes

¹ In February 2001 these markets have been released for Chinese investors and thus our data sample ends in December 2000.

² The empirical tests on the return time series suggest that they are heteroskedastic. Results are not reported here to conserve space, but are available upon request from the authors.