MARKET EFFICIENCY OF THE AMMAN STOCK MARKET: EVIDENCE FROM THE EXAMINATION OF TRADING RULES

Abstract

This paper tests the validity of the weak-form of the Efficient Market Hypothesis for the Amman Stock Exchange (ASE) for a full sample and three sub-periods of that spanning period 2000-2012. The research uses statistical analyses and moving average rules and offers further evidence of the inefficiency of the Amman stock market when applying trading rules. The empirical results indicate that moving average strategies are successful in predicting the returns for the ASE Index and outperforming the naive buy-and-hold strategy. However, the findings for the sub-periods suggest a certain degree of improvement toward the efficiency achieved by the Amman stock market that has occurred from recent developments such as the introduction of new regulations and the development of market microstructures.