Weak form efficiency and factors leading to market efficiency in the Kuwait stock market
A small stock market may be less efficient in the weak sense than a large one, because it is often less elaborately organised technically. Hence, information about stock price formation may spread only gradually through the financial community. Consequontly, stock prices may display e greeter degree of nonrandomness because traders are unable to eliminate this. The objective of the study is to test the weak form efficiency in Kuwait Stock Exchange, a segment of the Kuwait Long Term capital market. In addition, the study explores the impact of several. factors on market efficiency. In Chapter One the role of the stock market and its relationship to the economy will be discussed. The efficient market hypothesis is explored in Chapter Two. Chapter Three is devoted to surveying the empirical findings of other researchers in UK, USA and some other international markets. A number of authors have applied the efficient market hypothesis to actual stock market data, especially in the last twenty years. Some critical analyses are discussed in Chapter Four. The empirical question of the relations between market efficiency and stock valuation is explored in Chapter Five. An efficient market should price the security, so as to fully reflect the firms earning power. The uncertainty surrounding the stream of future income clouds this issue and has prompted debate among economists and financial analysts as to how the market values a given stock at any time. The characteristic of Kuwait Stock Exchange are the subject of Chapter Six. Chapter Seven presents empirical findings on the behaviour of Kuwait Stock Exchange in the context of efficient market theory. These findings will be compared with those related studies based on data from the United States and Europe. Chapter Eight will discuss the Kuwait Gulf Stock Exchange (over-the- counter market) or Al-Manakh. The 1982 crash of Al-Manakh is explored in depth in Chapter Nine and some of the important solutions will be discussed. In Chapter Ten the discussion Focusses on the three hypothesised Factors leading to market efficiency (market information, governmental rules and regulations, and market support facilities). Finally, in Chapter Eleven, general conclusions are drawn and recommendations presented with suggestions for further research.