| This study attempts to investigate the informational efficiency of the Korean stock market by conducting two different kinds of filter rule tests on sixty stocks traded from January 1981 to march 1989 in the Korean Stock Exchange.;Two filter rule tests conducted in this study are the standard and the reverse filter rule tests. The X-statistics are used to judge the significance of the risk-adjusted filter profits.;To see if significant filter profits can be exploited by any investor, two different minimum transactions costs are considered for each filter rule test: one for the twenty-five stock trading companies, the other for the general investors.;Also, the whole period is divided into three subperiods to investigate the existence of consistent filter profits on the ex ante basis and the necessity for updating.;In addition, beta estimate and Dimson's beta estimate of each stock are utilized to find the best filter rule strategy.;According to the test results, highly significant excess profits, which can not be explained by a standard equilibrium market model, can be consistently exploited on the ex ante basis by the stock trading companies by applying the standard filter rule, especially, to the low (Dimson's) beta stocks.;For the general investors, who have to pay much higher transactions costs than the stock trading companies do, slightly significant ex ante filter profits can be obtained by applying the standard filter rule to low (Dimson's) beta stocks and revising the best filter rule parameters, potential winners, (Dimson's) beta estimates, and the equally-weighted portfolio of the potential winners.;On the other hand, the reverse filter rule does not provide any significant filter profit on the ex ante basis to any investor even if (Dimson's) beta estimates are utilized.;Nevertheless, the test results of this study suggested the possibility of Korean stock market inefficiency by showing the consistent and significant excess profits from the standard filter rule. |
