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Testing the Random Walk Behavior and Efficiency of the Gulf Stock Markets

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  • Abraham Abraham
  • Fazal J. Seyyed
  • Sulaiman A. Alsakran

Abstract

Inferences drawn from tests of market efficiency are rendered imprecise in the presence of infrequent trading. As the observed index in thinly traded markets may not represent the true underlying index value, there is a systematic bias toward rejecting the efficient market hypothesis. For the three emerging Gulf markets examined in this paper, correction for infrequent trading significantly alters the results of market efficiency and random walk tests. The Beveridge–Nelson (1981) decomposition of index returns is done to estimate the underlying index.

Suggested Citation

  • Abraham Abraham & Fazal J. Seyyed & Sulaiman A. Alsakran, 2002. "Testing the Random Walk Behavior and Efficiency of the Gulf Stock Markets," The Financial Review, Eastern Finance Association, vol. 37(3), pages 469-480, August.
    • Handle: RePEc:bla:finrev:v:37:y:2002:i:3:p:469-480
    DOI: 10.1111/0732-8516.00008
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