An empirical investigation of the validity of the random walk model for the Amman stock exchange : evidence from monthly data

Abstract EN

The main purpose of this study is to investigate empirically the validity of the following research hypothesis about the Amman Stock Exchange (ASE) : successive price changes established in an efficient market are uncorrelated over time.

To test this hypothesis the present study employs monthly ( Natural Log ) price data obtained from 15 industrial firms listed in the ASE over the period from January 1, 1981 to December 31, 1989.

The results of the tests indicated that stock price series of the sample firms did not exhibit any significant statistical dependencies.

These results can.

at best, be interpreted to imply that the monthly stock prices established in the ASE cannot be use by market participants to formulate consistently profitable investment strategies.

However, these findings, due to the highly improbable kurtosis and skewness values of the price change series, cannot provide a sound empirical base to suggest that the ASE is an efficient market.