Empirical Tests of Weak Form Market Efficiency

1. Serial correlation tests

• Used to determine if price changes in future are related to the preceding period.
• They show a very low correlation coefficient indicating that a price rise did not show tendency to price fall or the other way round. 

2. Run tests

• Useful to test the randomness in stock price movements. 
• Only direction of price changes is seen and the absolute price changes are not considered.
• The increase in price is represented by + sign and decrease is represented by – sign. When there is no change, it is shown by 0. 
• A run represents a consecutive sequence of the same sign. 

3. Filter tests