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Does infrequent trading make a difference on stock market efficiency?

Author

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  • Osamah AlKhazali

Abstract

Purpose - After adjusting for thin trading, this study seeks to examine the market efficiency for six emerging stock markets in the Gulf Cooperation Council (GCC) countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Design/methodology/approach - This study uses the LOMAC single variance ratio (VR) test and the Wright's rank and sign VR tests to examine informational efficiency after correcting the data for thin trading that typically characterizes these indexes. Findings - As the observed indexes in thinly traded markets may not represent the true underlying index value, there is a systematic bias toward rejecting the efficient market hypothesis. The results of this study show that after removing the effect of infrequent trading the random walk hypothesis was not rejected in all GCC equity markets. Originality/value - To the best of the author's knowledge this is the first study that applies the Wright's rank and sign VR tests after adjusting for thin trading in GCC equity market.

Suggested Citation

  • Osamah AlKhazali, 2011. "Does infrequent trading make a difference on stock market efficiency?," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 28(2), pages 96-110, June.
    • Handle: RePEc:eme:sefpps:v:28:y:2011:i:2:p:96-110
    DOI: 10.1108/10867371111137102
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    Cited by:

    1. Al-Shboul, Mohammad & Alsharari, Nizar, 2019. "The dynamic behavior of evolving efficiency: Evidence from the UAE stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 73(C), pages 119-135.
    2. Camilleri, Silvio John & Green, Christopher J., 2014. "Stock market predictability: Non-synchronous trading or inefficient markets? Evidence from the National Stock Exchange of India," MPRA Paper 95302, University Library of Munich, Germany.
    3. Camelia Oprean, 2012. "Testing the financial market informational efficiency in emerging states," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 4(2), pages 181-190, Decembre.
    4. Jamaani, Fouad & Roca, Eduardo, 2015. "Are the regional Gulf stock markets weak-form efficient as single stock markets and as a regional stock market?," Research in International Business and Finance, Elsevier, vol. 33(C), pages 221-246.

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