Weak-Form Market Efficiency in the Dhaka Stock Exchange: Evidence from a Multi-Test Approach Around the 2024 Political Transition

Abstract This study tests the weak-form efficient market hypothesis (EMH) on the Dhaka Stock Exchange (DSE), examining whether the DSE30 Index and its 30 constituent stocks follow a random walk and whether their behaviour changed following Bangladesh's August 2024 political transition. Daily log returns for the DSE30 Index and its 30 constituents from January 2016 to August 2025 are analysed using the Ljung-Box Q-test, the runs test, the Lo-MacKinlay variance ratio test, augmented Dickey-Fuller unit-root tests and AR(1) regressions with Newey-West HAC standard errors, over the full sample and a post-transition subsample beginning 11 August 2024. Chow tests assess whether return dynamics changed at the transition. The empirical findings show prices are integrated and returns stationary but Ljung-Box tests reject zero autocorrelation for 84–97% of series, the runs test rejects randomness for 94%, and AR(1) and variance ratio tests detect short-horizon predictability for 42%, indicating weak-form inefficiency over the full sample. Post-transition rejection rates are below 30%, but AR(1) coefficients do not fall and Chow tests detect no systematic structural break, indicating the decline reflects lower test power rather than improved efficiency. Liquidity and avoiding interventions such as floor prices that suspend price discovery can improve the efficiency of DSE. This is the first DSE efficiency study covering the post-August 2024 period and the first to test formally for a structural break at the transition. Using five complementary tests at index and firm level, it also shows that a change in government alone has not improved price efficiency.