Efficiency Trends and Challenges in MENA Financial Markets

Abstract

A cornerstone of modern financial theory, with many theoretical and practical implications, the theory of the informational efficiency of financial markets plays an important role in the day-to-day practice of market finance.

Developed by Eugene Fama in 1965, this theory has been the subject of several empirical tests in different financial markets. Many studies have attempted to verify the truth or falsity of this hypothesis in different types of markets, often developed; however, few studies have focused on developing markets, especially those in the MENA region.

The aim of our study is to verify this hypothesis in this region, by analyzing the time series of daily logarithmic returns of the main stock market indices in a sample of 7 countries with different characteristics, using a range of econometric tests including normality and serial autocorrelation tests. We then attempt to explore the factors likely to explain the efficiency or inefficiency of these markets, using probit modeling.