Testing the evolving efficiency of Arab stock markets
Our goal is to examine whether Arab stock markets are becoming more efficient during the last decade thanks to organizational improvements and agents' learning. To achieve this goal a test of evolving weak-form efficiency using GARCH-M (1,1) approach along with state-space time-varying parameters is implemented for 11 Arab stock markets for periods ending in March 2009, rather than studying their efficiency/inefficiency at a given point of time as commonly done. All markets show high sensitivity to the past shocks and are found to be weak-form inefficient. Moreover, the efficiency does not clearly improve towards the first quarter of 2009 and negatively reacts to contemporaneous crises, except temporary sub-periods of efficiency improvement for the largest markets. This contrasts with mature markets and reveals the ineffectiveness of the reforms so far undertaken and calls to intensify efforts to expand and deepen these markets besides improving their liquidity and transparency and counteracting the shortcomings of the large individual trading by enhancing investment culture and spreading institutional trading.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Elyasiani, Elyas & Mansur, Iqbal, 1998. "Sensitivity of the bank stock returns distribution to changes in the level and volatility of interest rate: A GARCH-M model," Journal of Banking & Finance, Elsevier, vol. 22(5), pages 535-563, May.
- Abraham Abraham, 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, 08.
- Lagoarde-Segot, Thomas & Lucey, Brian M., 2008. "Efficiency in emerging markets--Evidence from the MENA region," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(1), pages 94-105, February.
- Rockinger, Michael & Urga, Giovanni, 2000. "The Evolution of Stock Markets in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 28(3), pages 456-472, September.
- Anand, Amber & Tanggaard, Carsten & Weaver, Daniel G., 2009. "Paying for Market Quality," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(06), pages 1427-1457, December.
- Alagidede, Paul & Panagiotidis, Theodore, 2009.
"Modelling stock returns in Africa's emerging equity markets,"
International Review of Financial Analysis,
Elsevier, vol. 18(1-2), pages 1-11, March.
- Paul Alagidede & Theodore Panagiotidis, 2009. "Modelling stock returns in Africa’s emerging equity markets," Discussion Paper Series 2009_01, Department of Economics, University of Macedonia, revised Jan 2009.
- Alagidede, Paul & Panagiotidis, Theodore, 2009. "Modelling stock returns in Africa's emerging equity markets," Stirling Economics Discussion Papers 2009-04, University of Stirling, Division of Economics.
- Antonios Antoniou & Nuray Ergul & Phil Holmes, 1997. "Market Efficiency, Thin Trading and Non-linear Behaviour: Evidence from an Emerging Market," European Financial Management, European Financial Management Association, vol. 3(2), pages 175-190.
- Keith Jefferis & Graham Smith, 2005. "The Changing Efficiency Of African Stock Markets," South African Journal of Economics, Economic Society of South Africa, vol. 73(1), pages 54-67, 03.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2001.
"Modeling and Forecasting Realized Volatility,"
Center for Financial Institutions Working Papers
01-01, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2001. "Modeling and Forecasting Realized Volatility," NBER Working Papers 8160, National Bureau of Economic Research, Inc.
- Anderson, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Labys, Paul, 2002. "Modeling and Forecasting Realized Volatility," Working Papers 02-12, Duke University, Department of Economics.
- Wright, Jonathan H, 2000.
"Alternative Variance-Ratio Tests Using Ranks and Signs,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 18(1), pages 1-9, January.
- Tom Doan, . "RATS programs to replicate Wright's Alternative Variance Ratio test results," Statistical Software Components RTZ00168, Boston College Department of Economics.
- Robert Engle, 2001. "GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 157-168, Fall.
- Seppi, Duane J, 1997. "Liquidity Provision with Limit Orders and a Strategic Specialist," Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 103-50.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Grant McQueen, 2004. "Whence GARCH? A Preference-Based Explanation for Conditional Volatility," Review of Financial Studies, Society for Financial Studies, vol. 17(4), pages 915-949.
- Andrew W. Lo, A. Craig MacKinlay, 1988.
"Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test,"
Review of Financial Studies,
Society for Financial Studies, vol. 1(1), pages 41-66.
- Andrew W. Lo & A. Craig MacKinlay, 1987. "Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test," NBER Working Papers 2168, National Bureau of Economic Research, Inc.
- Tom Doan, . "VRATIO: RATS procedure to implement variance ratio unit root test procedure," Statistical Software Components RTS00231, Boston College Department of Economics.
- Mauro Mecagni & Maged Sawky Sourial, 1999. "The Egyptian Stock Market; Efficiency Tests and Volatility Effects," IMF Working Papers 99/48, International Monetary Fund.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Barry Harrison & David Paton, 2005.
"Transition, the Evolution of Stock Market Efficiency and Entry into EU: The Case of Romania,"
Economic Change and Restructuring,
Springer, vol. 37(3), pages 203-223, 09.
- Barry Harrison & David Paton, 2004. "Transition, the Evolution of Stock Market Efficiency and Entry into EU: The Case of Romania," Economic Change and Restructuring, Springer, vol. 37(3), pages 203-223, 09.
- Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
- Rockinger, Michael & Urga, Giovanni, 2001. "A Time-Varying Parameter Model to Test for Predictability and Integration in the Stock Markets of Transition Economies," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 73-84, January.
- Coronel-Brizio, H.F. & Hernández-Montoya, A.R. & Huerta-Quintanilla, R. & Rodríguez-Achach, M., 2007. "Evidence of increment of efficiency of the Mexican Stock Market through the analysis of its variations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 380(C), pages 391-398.
- Rebecca Emerson & Stephen Hall & Anna Zalewska-Mitura, 1997.
"Evolving Market Efficiency with an Application to Some Bulgarian Shares,"
Economic Change and Restructuring,
Springer, vol. 30(2), pages 75-90, May.
- Emerson, Rebecca & Hall, Stephen G & Zalewska-Mitura, Anna, 1997. " Evolving Market Efficiency with an Application to Some Bulgarian Shares," Economic Change and Restructuring, Springer, vol. 30(2-3), pages 75-90.
- Rebecca Emerson & Stephen G. Hall & Anna Zalewska-Mitura, . "Evolving Market Efficiency with an Application to Some Bulgarian Shares," Ace Project Memoranda 96/18, Department of Economics, University of Leicester.
- FOUCAULT, Thierry & DEMARCHI, Marianne, 1998.
"Equity Trading Systems in Europe - A survey of recent changes,"
Les Cahiers de Recherche
663, HEC Paris.
- Marianne DEMARCHI & Thierry FOUCAULT, 2000. "Equity Trading Systems in Europe: A Survey of Recent Changes," Annales d'Economie et de Statistique, ENSAE, issue 60, pages 73-115.
- Huang, Roger D. & Stoll, Hans R., 1996. "Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE," Journal of Financial Economics, Elsevier, vol. 41(3), pages 313-357, July.
- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- Butler, Kirt C. & Malaikah, S. J., 1992. "Efficiency and inefficiency in thinly traded stock markets: Kuwait and Saudi Arabia," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 197-210, February.
- Ser-Huang Poon & Clive W.J. Granger, 2003. "Forecasting Volatility in Financial Markets: A Review," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 478-539, June.
- Jay Squalli, 2006. "A non-parametric assessment of weak-form efficiency in the UAE financial markets," Applied Financial Economics, Taylor & Francis Journals, vol. 16(18), pages 1365-1373.
- Xiao-Ming Li, 2003. "China: Further Evidence on the Evolution of Stock Markets in Transition Economies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(3), pages 341-358, 08.
- Mohamed A. El-Erian & Manmohan S. Kumar, 1995. "Emerging Equity Markets in Middle Eastern Countries," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 313-343, June.
- Zalewska-Mitura, Anna & Hall, Stephen G., 1999. "Examining the first stages of market performance: a test for evolving market efficiency," Economics Letters, Elsevier, vol. 64(1), pages 1-12, July.
When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:19:y:2010:i:1:p:25-34. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.