A Test for Weak-Form Efficiency in the Icelandic Stock Market

Abstract

This paper aims to tests the weak-form efficiency of the Icelandic stock market. To that extent a variety of variance-ratio tests are performed on the OMXI 15 and OMXI 6 indexes as well as three sector indexes: OMXI Financials, OMXI Industrials and OMXI Fisheries. The tests are split into two sets with the first one testing all indexes during the period from 1993 to 2013 (1993 to 2009 in the case of the fisheries and 2000 to 2013 in the case of the industrial and financial sectors). For the second set of tests the indexes are split into smaller time periods in order to see if there have been any changes in the efficiency of the market over time. The results of the tests indicate that the Icelandic stock market is overall not weak-form efficient. However the results for the individual sectors are more mixed; the industrial sector is shown to be efficient while the fisheries and financial sectors are efficient in some time periods but inefficient during others.