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Article
Publication date: 6 April 2021

Hesham I. AlMujamed

The purpose of this research was to examine the effectiveness of filter rules and investigate the weak form of the efficient market hypothesis (EMH) on sample shares of…

Abstract

Purpose

The purpose of this research was to examine the effectiveness of filter rules and investigate the weak form of the efficient market hypothesis (EMH) on sample shares of shariah-compliant vs. conventional banks listed on the Gulf Cooperation Council (GCC) stock market.

Design/methodology/approach

Nine trading filter strategies with different statistical analyses were used as defined in the literature (Fifield et al., 2005; Almujamed et al., 2018). Daily closing equity prices of a sample of twenty shariah-compliant banks and twenty conventional banks were recorded over the 18-year period ending 31 December 2017.

Findings

Shares of shariah-compliant banks in the GCC were not weak-form efficient since trading based on past information was predictable, profitable and outperformed the corresponding naïve buy-and-hold trading strategy. Shares of conventional GCC banks underperformed

Research limitations/implications

This paper’s findings should be useful for central banks and capital market authorities in GCC countries for evaluation when considering new regulations or process changes. Limitations include small sample numbers and need for more recent evaluations of accounting disclosure levels. A wider range of data, statistical analyses and other trading strategies is needed. Potential investors (Muslim and non-Muslim), shariah supervisory boards, and preparers of financial statements can benefit from this study.

Practical implications

The results suggest that selection of trading strategy affects the success of the rule and that mid-sized filters are the best.

Originality/value

This is an innovative study comparing performance of shariah-compliant and conventional banks under different filter rules.

Details

Journal of Investment Compliance, vol. 22 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 28 December 2018

Hesham I. Almujamed

The purpose of this paper is to examine the predictability of nine filter rules and test the validity of the weak form of the efficient market hypothesis for the Qatar…

Abstract

Purpose

The purpose of this paper is to examine the predictability of nine filter rules and test the validity of the weak form of the efficient market hypothesis for the Qatar Stock Exchange (QSE).

Design/methodology/approach

This study adopts the filter rule strategy employed by Fifield et al. (2005), which suggests that a buy signal occurs when a share’s price increases by X percent from the previous price. This strategy recommends that the share is held until its price declines by X percent from the subsequent high price. Any price changes below X percent are ignored. Additionally, using the theory of weak-form efficiency, this paper suggests that, if a stock market is efficient, an investor cannot achieve superior results by using these trading rules. However, if market inefficiencies are present, profitable opportunities may arise. To this end, the daily closing share prices of 44 companies listed on QSE are explored for 2004–2017.

Findings

The findings propose that QSE is not weak-form efficient because security prices are predictable. As such, investors who followed filter strategies based on past price information could have made profit. Sectoral analysis findings further suggest that firms in the consumer goods and services, industrial and insurance sectors are most efficiently priced amongst the QSE-traded companies.

Practical implications

The evidence may be plausibly helpful as supporting market participants and academics that suggest that selecting filter strategy is extremely important for determining the overall profitability of the trading strategy.

Originality/value

To the best of my knowledge, this is the first study on Qatar that examines the performance of filter rules relative to a passive investor in the context of trading rules with individual share prices for a new stock market. Furthermore, this study adds to the literature through the empirical finding that technical analysts using filter strategies could generate excess returns relative to the buy-and-hold strategy on new emerging stock markets. This study also suggests the levels of transparency and accounting disclosure are limited, which may help Qatari policy makers understand the QSE context. Therefore, it might lead them to introduce regulatory changes to improve the QSE’s efficiency level.

Details

International Journal of Productivity and Performance Management, vol. 68 no. 1
Type: Research Article
ISSN: 1741-0401

Keywords

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Article
Publication date: 18 June 2020

Hesham I. Almujamed

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…

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.

Details

Journal of Investment Compliance, vol. 21 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

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Article
Publication date: 8 April 2020

Hesham I. Almujamed and Mishari M. Alfraih

This paper aims to explore how the characteristics of the board of directors (BoD) shape earnings and book value information available to market participants.

Abstract

Purpose

This paper aims to explore how the characteristics of the board of directors (BoD) shape earnings and book value information available to market participants.

Design/methodology/approach

The authors investigated the impact of board size, presence of non-executives and role duality as proxies of effective corporate governance on the value relevance of financial reporting for 178 firms on the Kuwait stock exchange in 2013. Regression analysis based on Ohlson’s (1995) valuation model was used to test hypotheses.

Findings

The authors found that board size was significantly associated with company value and that Kuwaiti firms with large boards increased the value-relevance of earnings and book value. The influence of role duality was positive although not significant. The presence of non-executives on the board had a negative correlation with market value (not significant).

Research limitations/implications

These findings deliver empirical support for the prediction that the characteristics of the BoD improve the value relevance of financial reporting. Limitations such as small sample size and one-year duration of the study did not negate the basic findings, however. Future studies will use larger samples, longer duration and additional board characteristics.

Practical implications

This study provides empirical support for the hypothesis that board size influences market valuation. This study may benefit managers, investors and other decision-makers.

Originality/value

This study delivers empirical evidence on the impact of board characteristics on the value relevance of accounting information. It will be useful for regulators and market participants monitoring the influence of board characteristics on the value relevance of accounting information.

Details

International Journal of Ethics and Systems, vol. 36 no. 2
Type: Research Article
ISSN: 2514-9369

Keywords

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Article
Publication date: 20 March 2019

Hesham I. Almujamed and Mishari M. Alfraih

The study of developed capital markets suggests that information provided in financial statements has lost its value relevance to equity holders. The purpose of this paper…

Abstract

Purpose

The study of developed capital markets suggests that information provided in financial statements has lost its value relevance to equity holders. The purpose of this paper is to explore this issue in the emerging market of Qatar.

Design/methodology/approach

Following other studies in the literature, the study examines the value relevance of earnings and book values using the price valuation model provided by Ohlson (1995). A total of 215 observations were collected from all firms listed on the Qatari Stock Exchange over a period of five years (2012–2016).

Findings

This study suggests that the value relevance of both earnings and book values has noticeably decreased over the sample period. However, its results show that the decline in the value relevance of earnings favored book values.

Research limitations/implications

Like other studies, this one has limitations that suggest areas for future research. For example, in Qatar, like other emerging markets, a lack of data prevents the performance of deep analysis. Additionally, the authors only use Ohlson’s (1995) model as a framework for evaluation. It would be interesting to explore the changes when examining alternative valuation models. Another limitation is that the authors examine only two accounting measures: earnings and book values. Further research could explore changes in the value relevance of other measures, such as cash flow.

Practical implications

These findings provide empirical evidence regarding the value relevance of earnings and book values in an emerging market.

Originality/value

To the authors’ knowledge, this paper provides the first empirical evidence regarding the value relevance of earnings and book values in the emerging capital market of Qatar.

Details

EuroMed Journal of Business, vol. 14 no. 1
Type: Research Article
ISSN: 1450-2194

Keywords

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Article
Publication date: 2 December 2019

Hesham I. Almujamed and Mishari M. Alfraih

This purpose of this paper is to investigate the value relevance and incremental importance of earnings and book value in the Kuwaiti market to equity holders over time…

Abstract

Purpose

This purpose of this paper is to investigate the value relevance and incremental importance of earnings and book value in the Kuwaiti market to equity holders over time and in the context of the decade after the 2008 global financial crisis.

Design/methodology/approach

Following reports in the literature, the value relevance of earnings and book values was examined using the price valuation model provided by Ohlson (1995). Observations (2,817) were collected from all firms listed on the Kuwait Stock Exchange from 1994 to 2016.

Findings

The results suggest that the value relevance of earnings and book values declined over this period, and that the loss of value relevance for earnings data was greater than that for book value. The analysis provides evidence that the decline in value relevance of earnings and book value was driven by book values in the post-GFC period and suggests an exchange of value relevance between earning and book value post GFC.

Practical implications

The results are useful for regulators, analysts, investors and academics as an assessment of effectiveness of current financial reporting. There is a need for improvement because quality information helps equity holders determine value precisely. Timely financial reporting may mitigate the drop in value relevance of financial statements.

Originality/value

This is the first study to examine value relevance accounting measures of Kuwaiti companies, in the post-GFC context. It contributes to capital market research through an empirical examination of a frontier capital market.

Details

Journal of Financial Reporting and Accounting, vol. 17 no. 4
Type: Research Article
ISSN: 1985-2517

Keywords

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Article
Publication date: 5 April 2013

Hesham I. Almujamed, Suzanne Fifield and David Power

The purpose of this paper is to investigate the technical methods that investors in the Kuwait Stock Exchange use to evaluate ordinary shares. The research examines the…

Abstract

Purpose

The purpose of this paper is to investigate the technical methods that investors in the Kuwait Stock Exchange use to evaluate ordinary shares. The research examines the extent of investors' use of technical analysis, and the technical indicators and the sources of technical information employed by investors. Further, it compares the valuation methods and the sources of information employed by Kuwaiti investors with those used by investors in other developed and emerging stock markets.

Design/methodology/approach

A semi‐structured questionnaire guided the interviews with institutional investors, technical analysts and investment analysts in Kuwait.

Findings

Technical analysis is commonly used among research participants, particularly when timing their entry and exit points. The participants use a mixture of trend and pattern seeking; the Moving Average Rule was heavily used in the market but the Filter Rule Approach was not. Interviewees believed that investors did not have complete information about Kuwaiti quoted companies. Investors in Kuwait behave like their counterparts in other developed and emerging stock markets; fundamental analysis is considered the main valuation method among research participants, while technical and risk analyses were ranked second and third, respectively.

Practical implications

Interviewees in Kuwait paid more attention to technical analysis than did investors in developed countries; technical analysts looked at a company's fundamentals before they consulted graphs when deciding to purchase ordinary shares. Further, chartists followed trades of large investors to make profits. This topic needs to be investigated in emerging markets because these markets may be inefficient; trends and patterns may characterise the data from these markets and practitioners may use these techniques to exploit such patterns in returns. Further, the findings in this study may aid the regulators of these markets in their development of a framework that could improve efficiency by increasing the level of disclosure and transparency among listed firms.

Originality/value

This is one of the first studies in Kuwait to report the views of technical analysts and institutional investors about technical approaches to equity investment that are used in the market. Most studies on this topic have been conducted in developed stock markets. The current study considers the case for an emerging stock market, which is important in the Gulf and Middle East region. Further, access to technical analysts has been limited in prior research but this was not an issue in the current investigation.

Details

Qualitative Research in Financial Markets, vol. 5 no. 1
Type: Research Article
ISSN: 1755-4179

Keywords

Content available
Article
Publication date: 5 April 2013

Bruce Burton

Abstract

Details

Qualitative Research in Financial Markets, vol. 5 no. 1
Type: Research Article
ISSN: 1755-4179

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