Do general indexes mask sectoral efficiencies? A multiple variance ratio assessment of Middle Eastern equity markets

Abstract

Purpose

The purpose of the paper is to attempt to shed light on whether the use of general indexes may mask sectoral efficiencies by investigating the random walk (RW) and weak‐form efficiency (WFE) hypotheses in the equity markets of Jordan, Qatar, Saudi Arabia, and the United Arab Emirates.

Design/methodology/approach

The paper applies the multiple variance ratio test and the runs test to each equity market's weekly general and sectoral indexes.

Findings

The paper provides evidence of inconsistencies in three of the five analyzed equity markets when testing the RW hypothesis and in four of the five analyzed markets when testing the WFE hypothesis.

Originality/value

The findings in this paper provide empirical evidence supporting the use of sectoral indexes in lieu of general indexes in equity market analyses. These results have important financial and policy implications and would be of interest to investors, financial managers, and policy makers.

Citation

Benjelloun, H. and Squalli, J. (2008), "Do general indexes mask sectoral efficiencies? A multiple variance ratio assessment of Middle Eastern equity markets", International Journal of Managerial Finance, Vol. 4 No. 2, pp. 136-151. https://doi.org/10.1108/17439130810864023