Abstract:
This paper investigates the efficiency of the Karachi stock exchange
(KSE) with corrections for thin trading and non-linearity as suggested by
Miller, Muthuswamy and Whaley (1994). Daily, weekly, and monthly data
on stock prices from December 1991 to May 2003 have been used, with
three non-overlapping periods (December 1991 to May 1998; May 1998 to
September 2001; and September 2001 to May 2003) and one combined
period (May 1998 to May 2003). The results indicate that the Karachi
Stock Market is efficient for the overall period, the three sub-periods, and
the combined period in linear and non-linear behavior after making
adjustments for thin trading. The same result is observed when the
efficiency test is conducted on weekly and monthly data after adjusting for
thin trading during the overall study period.
