Degree
Master of Science in Finance
Department
Department of Finance
School
School of Business Studies (SBS)
Date of Submission
Fall 2023
Supervisor
Dr. Fawad Ahmad, Assistant Professor, Department of Finance, School of Business Studies (SBS)
Submission Type
Research Project
Document Type
Restricted Access
Pages
ix, 27
Keywords
Adaptive Market Hypothesis, Investor Behavior, Stock Return Predictability, Market Efficiency, Emerging Markets
Abstract
This research investigates whether the Adaptive Market Hypothesis (AMH) applies to the Pakistan Stock Exchange (PSX) by employing both linear and nonlinear models to assess the varying nature of the PSX. The study examines a time span from 2000 to 2022 and utilizes fixed-length windows of two years to analyze how returns change over time. To identify the presence of non-randomness in the daily returns of the PSX, the research employs the LoMcKinlay Variance Ratio Test and the Brock, Dechert, and Scheinkman (BDS) test. The findings suggest that the AMH provides a more comprehensive explanation of investor behavior on the PSX compared to the Efficient Market Hypothesis (EMH). This implies that the Pakistan Stock Exchange is inefficient and the market participants are not always rational. The study has implications for investment strategies, risk management, and market regulations in emerging and frontier markets like Pakistan.
Recommended Citation
Jamil, M. (2023). AMH in Pakistan: Evidence from Pakistan Stock Exchange (Unpublished graduate research project). Retrieved from https://ir.iba.edu.pk/research-projects-msfin/3
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