Do general indexes mask sectoral efficiencies? : A multiple variance ratio assessment of Middle Eastern equity markets

Purpose – The purpose of the paper is to attempt to shed light on whether the use of general indexes may mask sectoral efficiencies by investigating the random walk (RW) and weak‐form efficiency (WFE) hypotheses in the equity markets of Jordan, Qatar, Saudi Arabia, and the United Arab Emirates. Design/methodology/approach – The paper applies the multiple variance ratio test and the runs test to each equity market's weekly general and sectoral indexes. Findings – The paper provides evidence of inconsistencies in three of the five analyzed equity markets when testing the RW hypothesis and in four of the five analyzed markets when testing the WFE hypothesis. Originality/value – The findings in this paper provide empirical evidence supporting the use of sectoral indexes in lieu of general indexes in equity market analyses. These results have important financial and policy implications and would be of interest to investors, financial managers, and policy makers.