Can it walk the talk? Determining the validity of random walk hypothesis and technical analysis in the Philippine stock market

• Main Authors: Bongolan, Hazel P., Delos Reyes, Bea Eliza A., Ho, Jenielle Joye T., Rasco, Cale Robert S.
• Format: text
• Language: English
• Published: Animo Repository 2023
• Subjects: Stock exchanges—Philippines; Stocks—Prices—Philippines; Finance; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etdb_finman/73; https://animorepository.dlsu.edu.ph/context/etdb_finman/article/1074/viewcontent/Can_it_Walk_the_Talk__Determining_the_Validity_of_Random_Walk_Hyp.pdf
• Institution: De La Salle University

The topic on the presence of the random walk hypothesis (RWH) and the application of technical analysis in stock markets has been a long ongoing debate among its participants. Despite this, not many studies have been done contextualizing these theories and analyses to the stock market in the Philippines. With this, the paper aimed to determine the validity of the RWH in the Philippine stock market and whether technical analysis can be applied as an investing strategy. The research utilized the Philippine Stock Exchange Index, BPI Invest Philippine Equity Index Fund, BDO Equity Index Fund, Metro Philippine Equity Index Tracker Fund, and First Metro Philippine Equity Exchange Traded Fund as representations of the Philippine stock market with the PSEi as a reference to the funds being analyzed. Through the employing of statistical tests to confirm these theories and analyses, the researchers were able to find that while other tests showed that the funds deviated from the RWH, there remain a few that confirm its presence in the Philippine stock market. Consequently, the examination of the application of technical analysis, specifically the indicators Simple Moving Average (SMA) and Moving Average Convergence Divergence (MACD), showed statistical significance. However, the results of prior tests confirming some degree of presence of RWH in the funds observed would be affecting the results of the indicators.