Tests of Weak-form Efficient Market Hypothesis in Korean Stock Market

This paper examines weak form market efficiency hypothesis of Korean stock market. Sample data includes daily stock market prices from January 2005 to December 2010. The amount of sample data totaled to almost 1500 daily stock price indices. ARIMA application was used to model the whole five‐year time series. Forecasting based on past price data was unsuccessful as the error term exceeded predictive term. According to “Random walk” model of Fama, market is considered to be weak‐form efficient if forecasting is not possible. Results suggested that Korean stock market is efficient in “Weak‐form” level and investors’ attempt to make an excess return is an equivalent of “buy and hold” technique.