Testing the weak-form market efficiency of the Vietnamese Stock Market.

Abstract

The main intention of this study is to test whether the Vietnamese stock market is weak-form efficient. This is investigated by employing two different approaches, including tests of randomness and tests of predictability through the examination of the applicability and validity of technical analysis. In order to test for the first condition of weak-form market efficiency, the portmanteau tests of autocorrelations, the unit root tests, and the Lo and MacKinlay's variance ratio test are applied on the series of weekly returns of the Vietnamese price index. The results obtained from the three tests indicate significant deviations from the random walk hypothesis of the stock returns in the Vietnamese market. Furthermore, tests of the applicability of technical trading rules reveal that stock price changes in the Vietnamese stock market are predictable and can be profitably exploit net of trading costs. The implication of these results is that the Vietnamese stock market is not weak-form efficient