Student Name

Midhat JamilFollow


Master of Science in Finance


Department of Finance


School of Business Studies (SBS)

Date of Submission

Fall 2023


Dr. Fawad Ahmad, Assistant Professor, Department of Finance, School of Business Studies (SBS)

Submission Type

Research Project

Document Type

Restricted Access


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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.

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