The profitability of trading rules in stock markets: evidence from GCC countries

The thesis provides empirical evidence on weak-form efficiency in the Gulf Cooperation Council (GCC) stock markets. To communicate the academic concepts to the practitioners’ intuition, we utilise several trading rules to test weak-form efficiency in these markets. The trading rules are formulated on the basis of widely used technical indicators, namely moving average oscillator and trading-range break. Furthermore, we use several econometric estimation techniques to investigate the presence of seasonal effects in these markets (specifically the weekend, the holiday, the turn-of-the-month, and the month-of-the-year effects). Once a seasonal effect is found to be statistically significant, trading rules designed on the basis of these seasonal effects are evaluated. In addition, the role played by fundamentalists and technicians in the price-formation process is also examined. The empirical results reveal that trading rules generally outperform the passive buy-and-hold trading strategy. However, the performance of the trading rules appears to be highly temporal and largely diminishes when transaction costs are taken into consideration. Both fundamentalists and technicians have a role to play in price determination, although the technicians appear to be the more influential