Generalized Hurst exponent approach to efficiency in MENA markets

• Published in: Physica A Vol. 392; no. 20; pp. 5019 - 5026
• Main Author: Sensoy, A.
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 15-10-2013
• Subjects: Exponents; Generalized Hurst exponent; Market efficiency; Markets; MENA; Raw materials; Rolling window; Statistical mechanics; United Arab Emirates; Rolling window; Market efficiency; MENA; Generalized Hurst exponent
• ISSN: 0378-4371; 1873-2119
• DOI: 10.1016/j.physa.2013.06.041

We study the time-varying efficiency of 15 Middle East and North African (MENA) stock markets by generalized Hurst exponent analysis of daily data with a rolling window technique. The study covers a time period of six years from January 2007 to December 2012. The results reveal that all MENA stock markets exhibit different degrees of long-range dependence varying over time and that the Arab Spring has had a negative effect on market efficiency in the region. The least inefficient market is found to be Turkey, followed by Israel, while the most inefficient markets are Iran, Tunisia, and UAE. Turkey and Israel show characteristics of developed financial markets. Reasons and implications are discussed.
•We study the efficiency of MENA stock markets by generalized Hurst exponents using a rolling window.•MENA markets exhibit different degrees of long-range dependence.•The Arab Spring has had a negative effect on efficiency.•The least inefficient market is found to be Turkey, followed by Israel, while most inefficient markets are Iran and Tunisia.•Turkey and Israel show characteristics of developed financial markets.