Testing the weak-form efficiency of Arab stock markets after the COVID-19 pandemic

  • 83 Views
  • 11 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Weak-form efficiency means that stock prices should reflect all historical information and follow a random walk. This study examines the effect of the COVID-19 pandemic on the stock market weak-form efficiency of Arab countries, namely, Jordan, Lebanon, Kuwait, Morocco, Oman, Palestine, Bahrain, Egypt, Iraq, Qatar, Saudi Arabia, the United Arab Emirates, Syria, Tunisia, and Sudan. Daily data from July 1st, 2021 to November 12th, 2022 (370 trading days) are used to cover the period after starting the pandemic. The variance ratio and the runs test are used to test return predictability. The results show that the variance ratio values of Boursa Kuwait, the Egyptian Exchange, Tadawul, and the Amman Stock Exchange are statistically significant, indicating that their returns are unpredictable. In specific, the indices of these stock markets follow a random walk, and their price changes are independent. This is evidence that these stock markets are efficient at a weak level. In contrast, the insignificant values of the variance ratio indicate that returns are predictable in other Arab stock exchanges after the pandemic era. The findings of the Egyptian Exchange, Tadawul, and the Amman Stock Exchange are confirmed using the run test of weak-form efficiency. It reveals that the indices of these stock exchanges follow a random walk, while the indices of other Arab stock markets do not.

view full abstract hide full abstract
    • Table 1. Major statistics of Arab stock exchanges
    • Table 2. Descriptive statistics of index returns for Arab countries
    • Table 3. Stationarity test
    • Table 4. Variance ratio test
    • Table 5. Runs test
    • Conceptualization
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Data curation
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Formal Analysis
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Funding acquisition
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Investigation
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Methodology
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Project administration
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Resources
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Software
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Supervision
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Validation
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Visualization
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Writing – original draft
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi
    • Writing – review & editing
      Hanna Waleed Alrabadi, Naim Salameh Al-Qadi