ABSTRACT

The purpose of this study is to test the applicability of Random Walk

Hypothesis and thus, the weak form efficiency of Tehran Stock
Exchange (TSE).The investigation was based on the data representing
the stock price changes of a cross section of forty-nine companies
selected of random out of 420 companies listed at TSE.
The periodicity of data is 21th March 1989 to 11th August 2008.
The applicability of weak form market efficiency was examined with the
help of five different tests viz. Mean value, Normality of distribution,
Autocorrelation, Runs test and Variance ratio test.
The results show that for shorter time lags measured in days, there is
inter-dependence of stock market prices rejecting RWH. However, for
longer time lags measured in terms of weeks and months, we find
support for independence of stock market prices. Independence of
stock market prices for longer time lags is natural and acceptable.
However it is the preponderance of inter-dependence of stock market
prices during shorter intervals that highlights the inefficiency of TSE in
weak form.

IV