Are GCC stock markets predictable?
AbstractWeak-form efficiency in the stock markets of the Gulf Cooperation Council is examined using daily, weekly, and monthly index data for the 10-year period 2000-2009. Various variance ratio test specifications with specific homo- and heteroscedasticity assumptions found evidence of nonlinear dependence for the daily data, supporting the evidence in favor of a rejection of the random walk. A correction procedure for thin and nonsynchronous trading was applied but failed to produce significantly different results. Following an ARCH based model building procedure, conditional heteroscedasticity models are applied to the log return series. Significant differences in forecasting performance cannot be detected. The random walk hypothesis is generally rejected for daily but differences appear across markets using weekly and monthly data. The increased involvement of foreign institutional investors may play a role in the increased serial correlation in stock returns in the most recent period.
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Bibliographic InfoArticle provided by Elsevier in its journal Emerging Markets Review.
Volume (Year): 12 (2011)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/inca/620356
Market efficiency Emerging markets Variance ratio test GARCH models;
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