Efficiency tests and volatility effects: evidence from the Jordanian stock market

Abstract

This paper examines the efficiency of the Jordanian stock exchange and the relationship between returns and conditional volatility. An AR(1)-GARCH(1,1)-M model is estimated for five daily indices. The empirical results indicate significant departures from the efficient market hypothesis; in only two cases there is a significant relationship between risk and return, and returns tend to exhibit high persistent volatility clustering.