The Weak-Form Efficiency of The GCC Markets

An Empirical Analysis on The Weak-Form Efficiency of The GCC Markets Applying Selected Statistical Tests
Rengasamy Elango, Mohammed Ibrahim Hussein This paper tests for market efficiency across the seven stock markets in the GCC (Gulf Co-operation Council) countries. The GCC countries, of late, have been striving to strengthen their capital markets by introducing various innovative changes in relation to listing, regulatory, trading and settlement norms in order to improve transparency and informational efficiency. Using daily indices of the above markets between October 2001 and October 2006 and Kolmogorov –Smirnov test, we find that all the above seven markets reject the null hypothesis that the returns follow a normal distribution. Again, based on runs test for randomness, we find that the hypothesis pertaining to random walk and weak-form efficiency of the GCC markets is rejected for all the seven markets during the study period. This conclusion corroborates with the conclusions of the past studies carried out in GCC context and the developing and underdeveloped markets. The paper reiterates the need for an integrated GCC Stock market. The results and suggestions have wider implications for security analysts, investing community, stock exchanges, and other regulatory authorities in their policy decisions to improve their capital market functioning. Field of Research: Market efficiency, Random Walk, Kolmogorov – Smirnov test, Runs test for Randomness

1. Introduction
Stock markets play a crucial role in cementing the relationship between investors and the corporate sector. In this process, they help mobilizing the savings of people and direct them to the growth of trade, commerce and industrial sectors of an economy. In a nutshell, stock markets play an important role in capital formation and help fuel economic growth in the country. Looking at it from the investors’ point of view, stock market operations are often compared to operations in gambling dens,

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