Return predictability in emerging markets during a unique market condition

Very few studies have investigated the effect of the recent global financial crisis on weak form market efficiency. This paper seeks to investigate the weak-form market efficiency of the Saudi Stock Exchange (Tadawul), Kuwait Stock Exchange (KSE), Qatar Stock Exchange (QE), Bahrain Stock Exchange (BSE), Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX) before and after the recent global financial crisis. The sample includes daily price indices for the period starting from January 2007 to June 2008 for the pre-crisis and from June 2008 to December 2010 for the postcrisis. The results of parametric test [autocorrelation test using Ljung and Box (1978) Q-statistics test] show that the markets are inefficient during the post crisis and efficient during the pre-crisis except for Saudi Stock Exchange, and the opposite has been found for most lags. The non-parametric test (runs test) provides mixed evidence about the efficiency of these markets. This issue is important to security exchange regulators, investors and analysts who attempt to understand investor behaviour in times of crisis.