The Efficient Market Hypothesis Under Pressure from Behavioral Realities: An Empirical Perspective on Abnormal Returns

This paper examines the validity of the Efficient Market Hypothesis (EMH) in its weak form by analyzing the autocorrelation of daily returns for stock indices from emerging, developing, and developed markets over a 10-year period. While traditional definitions of abnormal returns arise in event studies, this paper uses the term more broadly to refer to potential systematic profits enabled by autocorrelation patterns, which contravene the “random walk” postulate of EMH. Findings suggest partial inefficiencies across all market types, especially during periods of economic or technological turbulence, and raise questions about the assumption of fully rational investor behavior posited by classical financial theory.