Gulf equity markets : a comparison of the structure and performance
The present study extends the literature available on the equity markets of developing countries by describing the development, the structure and by investigating the performance of the Gulf Equity markets in Kuwait, Saudi Arabia, Bahrain and Oman. First, an attempt was made to evaluate these equity markets by briefly examining the financial systems, providing a historical background to their development and introducing their current structure. Second, the thesis examines the performance of these markets by; (a) conducting a survey interviews to find out the obstacles for growth and investments in these markets; (b) investigating whether share returns are independent (c) investigating whether successive share returns are random (d) examining whether there is any pattern, for instance, day-of-the -week effect on the share returns; (e) estimating their transaction costs (the effective bid-ask spread). To analyse the performance, the study employed the classical techniques of Fama (1965), Errunza and Losoq (1985) and Dickinson and Muragu (1994) to determine the independency and randomness of share returns. The method of French (1980), Solnik and Bousquet (1990) and Insup Lee et al (1990) is used to test for the day-of-the week effect. Roll (1984) and Hsia, Fuller and Kao (1994) methods were used to estimate the transaction costs (the effective bid-ask spread). To summarise, the results show that the Gulf Equity Markets have a dependency on their share returns for Kuwait, Saudi Arabia, Bahrain and a lesser dependency for Oman Market. On the other hand, the share returns on each of the four markets were shown to be non random. The day of the week effect was not found in the market of Kuwait, Bahrain and Oman, whereas the Saudi Market showed the day-of-the week effect in the two periods tested. The spread as measured by the modified method of Hsia et al. is consistent with the results given by the Roll method which found the highest average spread in the Saudi Market followed by the Bahrain, Kuwait and Muscat markets.