Abstract:

 According to classical Fama’s definition: a market in which prices always fully reflect available information is called efficient. However, there are 3 types of market efficiency: weak-form efficiency, semistrong-form efficiency, strong-form efficiency. The weak-form market efficiency is tested the most often. One of the tools commonly used for its verification is the standard variance ratio (VR) test, but this test based on asymptotic approximations is biased and right-skewed in finite samples, resulting in misleading statistical inference. In 2000 Wright introduced alternative non-parametric variance ratio test based on ranks that outperforms standard VR test and when the sample data is highly nonnormal, his test may be more powerful than other VR tests. That is why we apply the non-parametric test by Wright to our data set consisted of daily returns of six base metals (aluminum, zinc, copper, nickel, lead, tin) traded at the London Metal Exchange in the period from January 2, 2007 to December 30, 2016. The aim of the research is to verify the weak-form efficiency of base metals market through testing the random walk hypothesis (RWH). The results obtained show that markets of aluminum, nickel, lead, and tin are efficient in a weak sense.