On the validity of the weak-form efficient markets hypothesis applied to the London stock exchange

Nabeel Al-Loughani and David Chappell

Applied Financial Economics, 1997, vol. 7, issue 2, 173-176

Abstract: The validity of the weak form of the efficient markets hypothesis (EMH) is tested for the FTSE 30 share index during a period when government economic policy towards the financial markets was relatively unchanging. The EMH would suggest random walk behaviour but this does not occur; instead the data series has significant heteroscedasticity. The series is successfully explained by a GARCH M(1, 1) model. We use the BDS test to show that the residuals from this model are IID.

Date: 1997
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DOI: 10.1080/096031097333736

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