Testing the Weak-Form Efficiency of the Palestinian Securities Market
Testing the Weak-Form Efficiency of the Palestinian Securities Market
Date
2009-10-03
Authors
Awad, Ibrahim
Daraghma, Zahran
Journal Title
Journal ISSN
Volume Title
Publisher
EuroJournals Publishing
Abstract
This paper examines the efficiency of the Palestine Security Exchange (PSE) at the
weak-level for 35 stocks listed in the market by using daily observations of the PSE
indices: Alquds index, general index, and sector indices. Parametric and nonparametric
tests for examining the randomness of the PSE stock prices were utilized. The parametric
tests include serialcorrelation test, and Augmented Dickey-Fuller (ADF) unit root tests. The
nonparametric tests include runs test, and Phillips-Peron (PP) unit root test. The study
utilized nonparametric tests for investigating the efficiency of the PSE at the weak level,
especially, the results of Jarque-Bera test for normality showed that the daily returns of the
PSE are not normally distributed. The serial correlation tests and the runs tests both
revealed that the daily returns are inefficient at the weak-form. Also, the unit root tests
(Augmented Dickey-Fuller (ADF) unit root test and Phillips-Peron (PP) unit root test)
suggest the weak-form inefficiency in the return series. However, the PSE is inefficient at
the weak level; as a result, this is likely to be an evidence that the prudent investor who
deals with the PSE will achieve abnormal returns using historical data of stock prices, and
trading volume.
Description
Keywords
Palestine Security Exchange, Weak-Form Efficient Market Hypotheses, Serial Correlation Test, Runs Test, Unit Root Tests, Alquds Index