Testing the Weak Form Market Efficiency: Evidence from the Casablanca Stock Exchange

In the three classifications of market efficiency, the weak form efficiency is the one that states past stock price movements cannot be used to forecast future prices and they follow a random walk. This study tests the weak form efficiency for the Casablanca Stock Exchange using parametric and non-parametric tests and studies the behavior of stock prices. Specifically, four parametric and non-parametric tests, namely the serial correlation test, the runs test, the unit root tests (i.e., the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) test), and the variance ratio test are used to test for the weak form market efficiency. The findings of all four empirical tests find that the Casablanca Stock Market is not weak form efficient and stocks prices follow a random walk. This finding implies that the technical analysis used for predicting the future stock prices is useless. Keywords: the weak from efficiency, the random walk, the Casablanca Stock