IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/54708.html
   My bibliography  Save this paper

Studying the Validity of the Efficient Market Hypothesis (EMH) in the Egyptian Exchange (EGX) after the 25th of January Revolution

Author

Listed:
  • Kamal, Mona

Abstract

There is no doubt that the close of the Egyptian Exchange (EGX) during the period 28/1- 22/3/2011 in the wake of 25th of January Revolution has a consequence on the efficiency of the stock market. This paper assesses the 'close-open-effect' on the main price indices. The results indicate the absence of unit roots in the main price indices before and after the revolution. This implies the rejection of weak-form efficiency. The estimation of the (EGARCH model) reflects information asymmetry after the revolution with bad news affecting the investors’ expectations more rapidly. In addition, a negative and significant 'close-open-effect' on the returns of the main price index is evident in the results.

Suggested Citation

  • Kamal, Mona, 2014. "Studying the Validity of the Efficient Market Hypothesis (EMH) in the Egyptian Exchange (EGX) after the 25th of January Revolution," MPRA Paper 54708, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:54708
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/54708/1/MPRA_paper_54708.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    2. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-273, April.
    3. Rafaqet Ali & Muhammad Afzal, 2012. "Impact of global financial crisis on stock markets: Evidence from Pakistan and India," E3 Journal of Business Management and Economics., E3 Journals, vol. 3(7), pages 275-282.
    4. J. Doyne Farmer, 2002. "Market force, ecology and evolution," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(5), pages 895-953, November.
    5. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    6. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Working Papers 111, Princeton University, Department of Economics, Center for Economic Policy Studies..
    7. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    8. Pyemo Afego, 2012. "Weak Form Efficiency of the Nigerian Stock Market: An Empirical Analysis (1984 2009)," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 340-347.
    9. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Working Papers 111, Princeton University, Department of Economics, Center for Economic Policy Studies..
    10. Timmermann, Allan & Granger, Clive W. J., 2004. "Efficient market hypothesis and forecasting," International Journal of Forecasting, Elsevier, vol. 20(1), pages 15-27.
    11. repec:pri:cepsud:91malkiel is not listed on IDEAS
    12. Elgilani E. Elshareif & Akram S. Hasanov & Hui-Boon Tan, 2009. "Unexpected Volatility Shifts and Efficiency of Emerging Stock Market: The Case of Malaysia," NUBS Malaysia Campus Research Paper Series 2009-05, Nottingham University Business School Malaysia Campus.
    13. 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.
    14. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," The Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
    15. 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, March.
    16. Fama, Eugene F., 1998. "Market efficiency, long-term returns, and behavioral finance," Journal of Financial Economics, Elsevier, vol. 49(3), pages 283-306, September.
    17. Granger, Clive W. J., 1992. "Forecasting stock market prices: Lessons for forecasters," International Journal of Forecasting, Elsevier, vol. 8(1), pages 3-13, June.
    18. Craig A. Depken, 2001. "Good News, Bad News and Garch Effects in Stock Return Data," Journal of Applied Economics, Taylor & Francis Journals, vol. 4(2), pages 313-327, November.
    19. Busse, Jeffrey A. & Clifton Green, T., 2002. "Market efficiency in real time," Journal of Financial Economics, Elsevier, vol. 65(3), pages 415-437, September.
    20. Jensen, Michael C., 1978. "Some anomalous evidence regarding market efficiency," Journal of Financial Economics, Elsevier, vol. 6(2-3), pages 95-101.
    21. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 59-82, Winter.
    22. Grossman, Sanford J, 1976. "On the Efficiency of Competitive Stock Markets Where Trades Have Diverse Information," Journal of Finance, American Finance Association, vol. 31(2), pages 573-585, May.
    23. Ray Ball, 2009. "The Global Financial Crisis and the Efficient Market Hypothesis: What Have We Learned?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 21(4), pages 8-16, September.
    24. Figlewski, Stephen C, 1978. "Market "Efficiency" in a Market with Heterogeneous Information," Journal of Political Economy, University of Chicago Press, vol. 86(4), pages 581-597, August.
    25. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Batiston Marques, Thales & Seixas dos Santos, Nelson, 2016. "Do Political News Affect Financial Market Returns? Evidences from Brazil," MPRA Paper 75530, University Library of Munich, Germany.
    2. Charilaos Mertzanis & Noha Allam, 2018. "Political Instability and Herding Behaviour: Evidence from Egypt’s Stock Market," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(1), pages 29-59, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stéphane Goutte & David Guerreiro & Bilel Sanhaji & Sophie Saglio & Julien Chevallier, 2019. "International Financial Markets," Post-Print halshs-02183053, HAL.
    2. Ashok Chanabasangouda Patil & Shailesh Rastogi, 2019. "Time-Varying Price–Volume Relationship and Adaptive Market Efficiency: A Survey of the Empirical Literature," JRFM, MDPI, vol. 12(2), pages 1-18, June.
    3. Stefanescu, Razvan & Dumitriu, Ramona, 2016. "Particularitǎţi ale evoluţiei variabilelor financiare [Some particularities of the financial variables evolution]," MPRA Paper 73481, University Library of Munich, Germany, revised 02 Sep 2016.
    4. Roland Rothenstein, 2018. "Quantification of market efficiency based on informational-entropy," Papers 1812.02371, arXiv.org.
    5. Akber, Ushna & Muhammad, Nabeel, 2013. "Is Pakistan Stock Market moving towards Weak-form efficiency? Evidence from the Karachi Stock Exchange and the Random Walk Nature of free-float of shares of KSE 30 Index," MPRA Paper 49128, University Library of Munich, Germany.
    6. Fatma SIALA GUERMEZI, & Amani BOUSSAADA, 2016. "The Weak Form Of Informational Efficiency: Case Of Tunisian Banking Sector," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 5(1), pages 1-1, January.
    7. Thomas Holtfort, 2019. "From standard to evolutionary finance: a literature survey," Management Review Quarterly, Springer, vol. 69(2), pages 207-232, June.
    8. Asif, Raheel & Frömmel, Michael, 2022. "Testing Long memory in exchange rates and its implications for the adaptive market hypothesis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 593(C).
    9. Aatola, Piia & Ollikka, Kimmo & Ollikainen, Markku, 2012. "Informational Efficiency of the EU ETS market – a study of price predictability and profitable trading," Working Papers 28, VATT Institute for Economic Research.
    10. Taufiq Choudhry & Ranadeva Jayasekera, 2015. "Level of efficiency in the UK equity market: empirical study of the effects of the global financial crisis," Review of Quantitative Finance and Accounting, Springer, vol. 44(2), pages 213-242, February.
    11. Ushna Akber & Nabeel Muhammad, 2014. "Is Pakistan Stock Market Moving towards Weak-Form Efficiency? Evidence from The Karachi Stock Exchange and the Random Walk Nature of Free-Float of Shares of KSE 30 Index," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(6), pages 808-836, June.
    12. Leković Miljan, 2018. "Evidence for and Against the Validity of Efficient Market Hypothesis," Economic Themes, Sciendo, vol. 56(3), pages 369-387, September.
    13. Alagidede, Paul, 2011. "Return behaviour in Africa's emerging equity markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(2), pages 133-140, May.
    14. Majumder, Debasish, 2013. "Towards an efficient stock market: Empirical evidence from the Indian market," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 572-587.
    15. Sheriffdeen A. Tella & Olumuyiwa G. Yinusa & Ayinde Taofeek Olusola & Saban Celik, 2011. "Global Economic Crisis And Stock Markets Efficiency: Evidence From Selected Africa Countries," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 25(1), pages 139-169.
    16. Rompotis, Gerasimos G., 2011. "Testing weak-form efficiency of exchange traded funds market," MPRA Paper 36020, University Library of Munich, Germany.
    17. Thomas Delcey & Francesco Sergi, 2019. "The Efficient Market Hypothesis and Rational Expectations. How Did They Meet and Live (Happily?) Ever After," Working Papers hal-02187362, HAL.
    18. Marcus F. da Silva & Eder Johnson de Area Leão Pereira & Idaraí Santos de Santana & José Garcia Vivas Miranda, 2013. "Pattern of fluctuations in the exchange rate change from fixed to floating, in Brazil, Argentina and Mexico," Economics Bulletin, AccessEcon, vol. 33(2), pages 1547-1555.
    19. Al Janabi, Mazin A.M. & Hatemi-J, Abdulnasser & Irandoust, Manuchehr, 2010. "An empirical investigation of the informational efficiency of the GCC equity markets: Evidence from bootstrap simulation," International Review of Financial Analysis, Elsevier, vol. 19(1), pages 47-54, January.
    20. Ziliotto, Arianna & Serati, Massimiliano, 2015. "The semi-strong efficiency debate: In search of a new testing framework," Research in International Business and Finance, Elsevier, vol. 34(C), pages 412-438.

    More about this item

    Keywords

    The Egyptian Exchange (EGX); the Efficient Market Hypothesis (EMH).;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:54708. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.