Testing the Efficiency of ASE by the Two Step Regression Based Technique, the Johansen Multivariate Technique Cointegration, and Granger Causality

Abstract

The Efficient Market Hypothesis (EMH) is based on the assumption that the future price of a stock cannot be predicted based on the currently available information. The main objective of this study is to test whether Amman Stock Exchange (ASE) is efficient at the weak-form. This study investigates any significant relation between the five indices of the Jordan market; General Index, Industrial Index, Insurance Index, Service Index and the Bank Index. The analysis of the performance of the Jordan equity market presented in this study is done through recently developed techniques; namely, The Two Step Regression Based Technique, The Johansen Multivariate Technique cointegration, and Granger causality.