Analysis of the Determinants of Financial Market Efficiency in the Mena Region: An Empirical Approach

Abstract

This article presents an empirical study focusing on the daily returns of the main stock indices from eight countries included in the sample. Serial autocorrelation tests were conducted to evaluate the presence of temporal autocorrelations within these returns.

The results of these tests highlight that among the eight markets analyzed, only five were deemed efficient in terms of the absence of significant serial autocorrelations in the logarithmic returns of the major stock indices in our sample. Specifically, the markets of Egypt, Bahrain, Kuwait, the United Arab Emirates, and Jordan demonstrated a lack of significance in the autocorrelation coefficients up to the seventh lag, thus revealing a certain form of limited efficiency. On the other hand, the markets of Morocco, Tunisia, and Qatar exhibited significant autocorrelation coefficients, indicating inefficiency in terms of serial dependence.

To deepen the understanding of these results, a probit analysis was conducted to identify the determinants of financial market efficiency within the MENA region. Independent variables such as market age, the number of listed companies, market capitalization, and government efficiency were integrated into the model. The results revealed that some of these variables exert a significant influence on the efficiency of financial markets in the MENA region.