Testing the joint stock market efficiency of OPEC countries

Abstract

The study investigates the joint market efficiency hypothesis of the OPEC countries by obtaining monthly stock price data from seven OPEC countries from January, 2005 to April, 2016.  The study confirms the risk-return tradeoff in the OPEC stock markets.  While most relationships are positive only a pair of country shows strong negative association   Results of both parametric and nonparametric tests indicate that all OPEC members’ monthly stock return, except Qatar, are not weak-efficient. This implies that not all OPEC stock markets are efficient.  Meanwhile, the study finds that current monthly stock return of one country member can be predicted using the historical monthly price movement of another OPEC member.  As a whole, the monthly stock price of OPEC countries are not jointly weak efficient.  Recommendations were offered based on these important discoveries.