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Tests of weak form efficiency in the Middle East emerging markets

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  • Mohammed Omran
  • Suzanne V. Farrar
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    Abstract

    Purpose – The purpose of this paper is to investigate the efficiency of the emerging stock markets in the Middle Eastern countries. Design/methodology/approach – The paper investigates the validity of the random walk hypothesis (RWH) and tests for calendar effects in five major Middle Eastern emerging markets, by applying a range of statistical and econometrics techniques. Findings – In general, the results reject the RWH for all markets and instead suggest that the stock returns in these countries exhibit calendar effects. However, the evidence for the Israel Tel100 stock market shows greater support for the RWH compared with the other markets in the sample. Research limitations/implications – The evidence for calendar effects is subject to data limitations due to the relatively short time period for which data were available. The anomalies observed may result from institutional factors specific to the countries in the sample. Further research in this area might aim to clarify the influence of such institutional factors. Practical implications – The limited support for weak form efficiency in Middle Eastern emerging markets implies a degree of predictability of returns for these emerging stock markets, which may be a factor in their attractiveness to global investors. Originality/value – Owing to the relatively recent establishment of stock markets in most of the Middle Eastern countries, little is known about their stock price behaviour. This paper examines this under-researched area and is of value to finance academics and to global investors.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Studies in Economics and Finance.

    Volume (Year): 23 (2006)
    Issue (Month): 1 (March)
    Pages: 13-26

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    Handle: RePEc:eme:sefpps:v:23:y:2006:i:1:p:13-26

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    Web page: http://www.emeraldinsight.com

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    Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
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    Related research

    Keywords: Econometrics; Emerging markets; Middle East; Stock markets;

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    Cited by:
    1. Rompotis, Gerasimos G., 2011. "Testing weak-form efficiency of exchange traded funds market," MPRA Paper 36020, University Library of Munich, Germany.

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