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Are share prices of Gulf corporate council banks predictable? A time-series analysis

Hesham I. Almujamed (Business Studies, Public Authority for Applied Education and Training, Kuwait City, Kuwait)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 18 June 2020

Issue publication date: 13 December 2020

89

Abstract

Purpose

This research aimed to evaluate the predictability of moving-average strategies and examined the validity of the weak form of the efficient market hypothesis (EMH) for securities of banks listed in the Gulf Cooperation Council (GCC) stock markets of Bahrain, Kuwait, Qatar and Saudi Arabia.

Design/methodology/approach

Several statistical analyses and eight moving-average rules were employed where buy and sell signals were produced by comparing a security price’s short- and long-term moving averages. The study covered the daily closing share prices of 40 GCC-listed banks over the 18-year period ending 31 December 2017.

Findings

The results suggest that securities of banks in the GCC were not weak-form efficient because share prices were predictable. Investors who traded using moving-average strategies could generate higher profits. Analysis of variance found that securities of Kuwaiti banks were the most efficiently priced.

Practical implications

The findings supported the idea that profitability depended on the moving-average rules and country chosen. Transaction costs did not affect the returns obtained using different trading rules.

Originality/value

This work facilitates future evaluation of accounting disclosure environments as well as the market efficiency and the performance of securities in the GCC countries. The performance of moving average rules among representative countries that share similar characteristics was analyzed. Different market participants, including investors, analysts and regulators, can benefit from this study for decision-making. These results suggest that new regulations might be drafted that would improve the timeliness of accounting information and the banks’ level of efficiency.

Keywords

Citation

Almujamed, H.I. (2020), "Are share prices of Gulf corporate council banks predictable? A time-series analysis", Journal of Investment Compliance, Vol. 21 No. 1, pp. 9-28. https://doi.org/10.1108/JOIC-02-2020-0003

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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