Testing the Weak-Form Market Efficiency in the Egyptian Stock Market: A Test on the Efficiency of Mutual Funds and Banking Sector’s Individual Stocks

نوع المستند : المقالة الأصلية

المؤلف

أکاديمية الشروق - مصر

المستخلص

Synopsis
The purpose of the present study is to test the weak-form market efficiency in the Egyptian Stock Market by examining, for the first time, the behavior of individual stocks returns in a particular sector, namely the banking sector and compares its stock behavior to the market return as a whole by examining the Egyptian Stock Market Price Index (EGX100) over the period from 2006 to 2010 using, also for the first time, ARMA model.
The study tests the efficiency of the market in pricing securities. In addition, The research investigates the relationship between returns and the conditional volatility of time-varying, the impact of price limits on the daily price changes, on the efficiency of the market, and the effectiveness of price limits in meeting the objective of dampening fluctuations in the market.
Moreover, this study aims at examining if the efficient market hypothesis (EMH) applies to the Egyptian Mutual Fund sector, and thereby determine whether mutual funds in Egypt beat the market or not (i.e. whether it is possible to beat the market by investing in mutual funds).
The research found evidence of significant departure from the efficient market hypothesis. Although the market is inefficient, the possibility of realizing profit using the serial correlation in prices is eliminated due to the presence of high transactions costs. The introduction of circuit breakers in the form of symmetric price limits on individual shares is found to
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increase the serial correlation of returns, thus contributing to the inefficiency in the market. The tests for the performance of mutual funds showed that mutual funds in Egypt were unable to outperform a passive market strategy.
The findings of this paper has impact on possibility of realizing profit by predicting future returns in the Egyptian Stock Market, the impact on stock pricing and the use of technical and fundamental analysis; concerning market efficiency. On the other hand, has impact on investment strategy and investment manager; concerning mutual funds.

الكلمات الرئيسية

الموضوعات الرئيسية

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