The Impact of Regulatory Change and Market Shocks on the Weak-Form Efficiency of the Kuwait Stock Exchange

This paper investigates the efficiency of the Kuwait Stock Exchange (KSE) in the periods prior to and after the invasion of Kuwait by Iraq in 1990. The invasion provided a major shock to the KSE and led to the market closing for a period of two years. In spite of a number of regulatory changes designed to improve confidence in the KSE since the recommencement of trading in 1992, the market appears to continue to be characterized by inefficiency. Such inefficiency is evident even when allowance is made for the effects of thin trading. However, this inefficiency is evidence only comes to light when consideration is given to possible non-linear behaviour in the returns generating process.