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Middle Eastern stock markets: absolute, evolving and relative efficiency

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  • Kinga Niemczak
  • Graham Smith

Abstract

The martingale hypothesis is tested for 11 Middle Eastern stock markets using three finite sample variance ratio tests. For comparative purposes, the same tests are applied to data obtained for the US. The tests are carried out with both observed returns and returns corrected for thin trading, so the effect of the thin trading correction is evident. A rolling window is used to track the changes in efficiency through time and rank markets by the relative efficiency. Overall, most markets experience successive periods of efficiency and inefficiency, which is consistent with the adaptive markets hypothesis. Predictability varies widely: the least predictable stock markets are those located in Turkey, Egypt and Israel; the most predictable are in Jordan, Lebanon and Saudi Arabia. When returns are corrected for thin trading, there is much less variation in relative efficiency.

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  • Kinga Niemczak & Graham Smith, 2013. "Middle Eastern stock markets: absolute, evolving and relative efficiency," Applied Financial Economics, Taylor & Francis Journals, vol. 23(3), pages 181-198, February.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:3:p:181-198
    DOI: 10.1080/09603107.2012.714068
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    Cited by:

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    3. Aneta Dyakova & Graham Smith, 2013. "The evolution of stock market predictability in Bulgaria," Applied Financial Economics, Taylor & Francis Journals, vol. 23(9), pages 805-816, May.
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    5. Deniz Erer & Elif Erer & Selim Güngör, 2023. "The aggregate and sectoral time-varying market efficiency during crisis periods in Turkey: a comparative analysis with COVID-19 outbreak and the global financial crisis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-25, December.
    6. Pınar Evrim Mandacı & F. Dilvin Taskın & Zeliha Can Ergun, 2019. "Adaptive Market Hypothesis," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 84-101.
    7. Urquhart, Andrew & McGroarty, Frank, 2016. "Are stock markets really efficient? Evidence of the adaptive market hypothesis," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 39-49.
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    9. Graham Smith & Aneta Dyakova, 2014. "African Stock Markets: Efficiency and Relative Predictability," South African Journal of Economics, Economic Society of South Africa, vol. 82(2), pages 258-275, June.

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