Are Gulf stock markets efficient? Evidence from new multiple variance ratio tests

Jasim Al‐Ajmi · J. H. Kim

38 citations0/0 files storedApplied Economics

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Financial Markets and Investment Strategies Financial Risk and Volatility Modeling Stock Market Forecasting Methods

Abstract

The purpose of this article is to test for the Random Walk Hypothesis (RWH) for seven stock markets in Gulf Cooperation Council (GCC) countries, and to determine the effect of the correction for thin trading. Three new multiple variance ratio tests are applied to both observed returns and returns corrected for thin trading. It is found overall that the RWH does not hold for the GCC stock markets at both daily and weekly frequencies. This evidence is particularly strong when daily returns are used, where the RWH is soundly rejected for both observed and corrected returns.

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References

1997The Econometrics of Financial Markets 1988Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test 1981A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the ‘business cycle’1990Data-Snooping Biases in Tests of Financial Asset Pricing Models 1990The Dynamics of Stock Index and Stock Index Futures Returns 1993A simple multiple variance ratio test 2000Alternative Variance-Ratio Tests Using Ranks and Signs 2007Are Asian stock markets efficient? Evidence from new multiple variance ratio tests

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