Market Predictability and Mean Reversion in MENA Markets: An Empirical Study of Equity Market Efficiency
Market Predictability and Mean Reversion in MENA Markets: An Empirical Study of Equity Market Efficiency

Author(s): Mariana Chambino, Nicole Horta, Rui Dias
Subject(s): Social Sciences, Economy
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: MENA markets; Variance ratios; Random walk; Arbitration
Summary/Abstract: This research aims to provide evidence for investors and regulators of the MENA stock markets, including Bahrain (BASI), Egypt (EGX 30), Abu Dhabi (FTSE ADX), Pakistan (KSE 100), Morocco (MASI), Oman (MSM 30), Qatar (QSE), Saudi Arabia (TADAWUL ALL), and Tunisia (TUNNIDEX), from March 1, 2018, to February 23, 2023. Because variance ratios are less than one, the results show that indexes do not follow the random walk hypothesis (RWH), suggesting autocorrelation in returns over time and average reversal in all indexes. These findings refute both the RWH and the financial market information efficiency hypothesis. According to the study, market regulators should take initiatives to improve information in these regional markets.

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