Do MENA stock market returns follow a random walk process?

Abstract

In this research, three variance ratio tests; namely the standard variance ratio test, the wild bootstrap multiple variance ratio test, and the non-parametric rank scores test are adopted to test the random walk hypothesis (RWH) of stock markets in Middle East and North Africa (MENA) region using most recent data from January 2010 to September 2012. The empirical results obtained by all three econometric tests show that the RWH is strongly rejected for Kuwait, Tunisia, and Morocco. However, the standard variance ratio test and the wild bootstrap multiple variance ratio test reject the null hypothesis of random walk in Jordan and Kingdom of Saudi Arabia (KSA), while non-parametric rank scores test do not. We may conclude that Jordan and KSA stock market are weak efficient. In sum, the empirical results suggest that return series in Kuwait, Tunisia, and Morocco are predictable. In other words, predictable patterns that can be exploited in these markets still exit. Therefore, investors may make profits in such less efficient markets.

Testing Random Walk Behavior in the Damascus Securities Exchange

“…This indicates that, for all the intervals, the rejection of random walk is due to the autocorrelation of the daily increments in the return series. The findings of variance ratio test is consistent with previous researches for other MENA markets such Jordan, Tunisia and Morocco (Lahmiri, 2013), Abu Dhabi, Bahrain, Dubai, Kuwait, Oman, Qatar and Saudi Arabia (Al-Ajmi et al, 2012).…”

Emerging Markets Reward Risk

“…Recently, several works have focused on studying stock market; including examining market efficiency (Lahmiri et al, 2014;Lahmiri, 2013aLahmiri, , 2014aLahmiri, , 2014bLahmiri, , 2015Lahmiri, , 2016aLahmiri, , 2016bLahmiri, , 2016c, modeling and forecasting market prices (Lahmiri, 2011;Lahmiri, 2012bLahmiri, , 2012cLahmiri & Boukadoum, 2015), and investigating the effects of technology and governance on market behavior (Ikpefan & Oligbo, 2012;Narang, 2012;Choudhury, 2013;Shaw et al, 2014). Besides, the linkage between asset risk and return is an interesting issue in portfolio management and corporate finance that merits deeper investigation in emergent markets.…”

Regional Stock Market Efficiency at Weak Form after the Covid-19 Vaccination Approval

“…Salameh et al (2011),Al-Ajmi and Kim (2012),Khan and Vieito (2012),Nikita, and Soekarno (2012),Patel et al (2012),Lahmiri (2013), Jethwani and Achuthan (2013), Asaad et al (2015), Hawaldar et al (2017), Ahmed and Hossain (2019) Cramer-von Mises test, Watson test, Anderson-Darling test, and four non-parametric techniques such as Runs Test, Variance Ratio Test, Phillips-Perron unit root test, and Autocorrelation test to check the random walk hypothesis.…”