Know about RWTAlso called as Weak Form of Efficiency.Prices are based on the inflow of news which randomly occur in the market.Future prices cannot be predicted.Buying and selling information lead the trader align with the intrinsic value.

Simulation Test

Serial Correlation Test

Run Test

Filter Test

Simulation Test Performed by Harry Roberts.Examine the appearance of Dow

Jones index expressed in levels and weekly changes

Changes are generated from random numbers & then converted to graphs depicting levels of the Dow Jones index.

Simulation Test

Serial Correlation• Examine by Moore in 1964.• Correlate the price change in one

week to price change in another week.

• Price changes are correlated, points plotted in graph tend to lie in the straight line.

• He considered avg correlation to be 0.06%, if low low tendency.

Filter TestStock moves up with percent

Buy it and it for a long period.When the same percent falls

Sell it.It Ranges from 0.5% to 50%.For eg:- Assume filter to be 10%.

Price is Rs 20, Buy at Rs 22 & reached till Rs 30 & fall, Sell at Rs. 27.

Run TestIt is a set of consecutive prices of the same sign.If increase “+” & decrease “-”.

Shares Number of Runs

ABC

+ + + + + +………2+-+-+-+-+ -…..10- -+- + + +- - -….6