Do MENA stock market returns follow a random walk process?

Abstract: In this research, three variance ratio tests: 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 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.

How to cite this paper

 Lahmiri, S. (2013). Do MENA stock market returns follow a random walk process?.International Journal of Industrial Engineering Computations , 4(1), 165-172.

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