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Testing the Random Walk Behavior and Efficiency of the Gulf Stock Markets
Author(s) -
Abraham Abraham,
Seyyed Fazal J.,
Alsakran Sulaiman A.
Publication year - 2002
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/0732-8516.00008
Subject(s) - random walk , index (typography) , efficient market hypothesis , economics , econometrics , random walk hypothesis , market efficiency , stock (firearms) , financial economics , stock market index , value (mathematics) , stock market , capitalization weighted index , statistics , mathematics , computer science , geography , context (archaeology) , world wide web , archaeology
Inferences drawn from tests of market efficiency are rendered imprecise in the presence of infrequent trading. As the observed index in thinly traded markets may not represent the true underlying index value, there is a systematic bias toward rejecting the efficient market hypothesis. For the three emerging Gulf markets examined in this paper, correction for infrequent trading significantly alters the results of market efficiency and random walk tests. The Beveridge–Nelson (1981) decomposition of index returns is done to estimate the underlying index.