Global financial crisis and weak-form efficiency of Islamic sectoral stock markets: An MF-DFA analysis

- The MF-DFA method is used to evaluate 10 sector indices of Islamic stock markets.
- This paper assesses the effects of the GFC on the weak-form EMH.
- The price dynamics of Islamic stock markets are multifractal in nature.
- Islamic stock markets become less efficient after the GFC.
- Islamic markets show high long-term efficiency but moderate short-term efficiency.

This paper estimates the weak-form efficiency of Islamic stock markets using 10 sectoral stock indices (basic materials, consumer services, consumer goods, energy, financials, health care, industrials, technology, telecommunication, and utilities). The results based on the multifractal detrended fluctuation analysis (MF-DFA) approach show time-varying efficiency for the sectoral stock markets. Moreover, we find that they tend to show high efficiency in the long term but moderate efficiency in the short term, and that these markets become less efficient after the onset of the global financial crisis. These results have several significant implications in terms of asset allocation for investors dealing with Islamic markets.