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Do general indexes mask sectoral efficiencies?

Author

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  • Hicham Benjelloun
  • Jay Squalli

Abstract

Purpose - The purpose of the paper is to attempt to shed light on whether the use of general indexes may mask sectoral efficiencies by investigating the random walk (RW) and weak‐form efficiency (WFE) hypotheses in the equity markets of Jordan, Qatar, Saudi Arabia, and the United Arab Emirates. Design/methodology/approach - The paper applies the multiple variance ratio test and the runs test to each equity market's weekly general and sectoral indexes. Findings - The paper provides evidence of inconsistencies in three of the five analyzed equity markets when testing the RW hypothesis and in four of the five analyzed markets when testing the WFE hypothesis. Originality/value - The findings in this paper provide empirical evidence supporting the use of sectoral indexes in lieu of general indexes in equity market analyses. These results have important financial and policy implications and would be of interest to investors, financial managers, and policy makers.

Suggested Citation

  • Hicham Benjelloun & Jay Squalli, 2008. "Do general indexes mask sectoral efficiencies?," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 4(2), pages 136-151, April.
    • Handle: RePEc:eme:ijmfpp:v:4:y:2008:i:2:p:136-151
    DOI: 10.1108/17439130810864023
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    References listed on IDEAS

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    1. Eduardo Borensztein & R. Gaston Gelos, 2003. "A Panic-Prone Pack? The Behavior of Emerging Market Mutual Funds," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 1-3.
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    Cited by:

    1. Hesham I. Almujamed & Suzanne G. M. Fifield & David M. Power, 2018. "An Investigation of the Weak Form of the Efficient Markets Hypothesis for the Kuwait Stock Exchange," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(1), pages 1-28, April.
    2. Hiremath, Gourishankar S & Bandi, Kamaiah, 2010. "Some Further Evidence on the Behaviour of Stock Returns in India," MPRA Paper 48518, University Library of Munich, Germany.
    3. repec:ipg:wpaper:2014-078 is not listed on IDEAS
    4. Raboy, David G. & Basher, Syed Abul & Hossain, Ishrat & Kaitibie, Simeon, 2012. "More efficient production subsidies for emerging agriculture in micro Arab states: a conceptual model," MPRA Paper 38854, University Library of Munich, Germany.
    5. Imen Zgueb Rejichi & Chaker Aloui & Duc Khuong Nguyen, 2014. "Assessing the efficiency of the MENA emerging stock markets: A sectoral perspective," Working Papers 2014-78, Department of Research, Ipag Business School.
    6. Mamdouh Abdulaziz Saleh Al-Faryan & Everton Dockery, 2021. "Testing for efficiency in the Saudi stock market: does corporate governance change matter?," Review of Quantitative Finance and Accounting, Springer, vol. 57(1), pages 61-90, July.

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