Weak efficiency in the stock market: new empirical evidence for Colombia 2008 – 2023
Carlos Fernando Parra Moreno
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Abstract
This paper analyzes the validity of the weak-form efficiency hypothesis in the Colombian stock market, using the COLCAP index from the Colombian Stock Exchange. Daily data are used for the period from January 2008 to June 2023, applying econometric methodologies for time series analysis, such as the variance ratio test and unit root tests, including versions that account for structural breaks. These tools allow for the evaluation of whether stock prices follow a random walk, meaning whether they fully reflect the information contained in past prices. The results provide statistically significant evidence to reject the null hypothesis of weak-form efficiency, both for the entire period and for subperiods defined by structural changes in the series. This indicates that past prices of the COLCAP index contain relevant information for anticipating future prices, which contradicts the assumptions of the efficient market hypothesis in its weak form.
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