Efficiency and memory dependence of Shariah equity markets

Abstract

The present study attempts to examine the presence of informational efficiency and memory dependence of Malaysia and Gulf Cooperation Council (GCC) Shariah Equity markets using daily stock returns for the period of 01st January 2009 to 31st June 2017. The study employs both traditional and advanced approaches of finding out the informational efficiency and fractional co-integration of the Shariah equity markets. From the results of efficiency it was observed that Shariah equity market of Malaysia was highly efficient and GCC Shariah equity markets lacked efficiency in terms of its past information prevailed in the market. The results of integration test clearly indicated that there was short and long memory dependence in the returns of GCC Shariah indices. Hence it can be concluded that Malaysia Shariah equity market was efficient and GCC Equity Shariah markets were not informationally efficient but fractionally co-integrated during the study period.