Random Walk Hypothesis: An Empirical Comparison of Shari’ah and Non-Shari’ah Capital Markets of Pakistan and China

Authors

  • Muhammad Shehryar University of Education, Lahore, Pakistan
  • Furrukh Bashir Bahauddin Zakariya University, Multan, Pakistan
  • Kashif Raza The Islamia University of Bahawalpur, Bahawalnagar Campus, Pakistan
  • Rashid Ahmad Bahauddin Zakariya University, Multan, Pakistan

DOI:

https://doi.org/10.52131/joe.2022.0403.0091

Keywords:

Shari’ah Stock Indices, Non-Shari’ah Stock Indices, Market Efficiency, Random Walk Hypothesis

Abstract

The instant research comparatively determines the weak-form informational efficiency of Shari’ah and corresponding non-Shari’ah equity indices of Pakistan and China by testing the Random Walk Hypothesis. For this purpose, this study employed the Automatic Variance Ratio on the daily index data for the time ranging from 1st July 2009 to 30th June 2018. The findings of the study show that the Shari’ah index of Pakistan (KMI-30) is informational efficient in weak-form but the Shari’ah index of China (FTSE Shariah China Index) is not efficient. On the other hand, as far as the non-Shari’ah indices are concerned, KSE-100 Index (Pakistan) is not weak-form efficient, but the Shanghai Composite Index (China) is efficient. So, it is determined that in Pakistan, the Shari’ah equity market is weak form efficient during the sample period but its counterpart non-Shari’ah equity market is not efficient. Further, in China, the non-Shari’ah stock market is weak-form efficient, but its Shari’ah stock market is not efficient. In the nutshell, it is concluded that the Shari’ah indices are also witnessing efficiency along with non-Shari’ah indices, and Shari’ah indices viz-a-viz Shari’ah stocks can be good option for optimum investment.

Author Biographies

Muhammad Shehryar, University of Education, Lahore, Pakistan

Lecturer, UE Business School, Division of Management and Administrative Sciences

Furrukh Bashir, Bahauddin Zakariya University, Multan, Pakistan

Assistant Professor, School of Economics

Kashif Raza, The Islamia University of Bahawalpur, Bahawalnagar Campus, Pakistan

Lecturer, Department of Economics

Rashid Ahmad, Bahauddin Zakariya University, Multan, Pakistan

Assistant Professor, School of Economics

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Published

2022-09-28

How to Cite

Shehryar, M., Bashir, F., Raza, K., & Ahmad, R. (2022). Random Walk Hypothesis: An Empirical Comparison of Shari’ah and Non-Shari’ah Capital Markets of Pakistan and China. IRASD Journal of Economics, 4(3), 439–447. https://doi.org/10.52131/joe.2022.0403.0091