Abstract
We assess the informational efficiency of nine Dow Jones Islamic market indices and their counterpart conventional Morgan Stanley indices using data from 1996 to 2020. We test the martingale difference hypothesis of no return predictability over time and assess the adaptive market hypothesis over different market conditions. We find that the null is rejected in several periods in line with the adaptive market hypothesis for both Islamic and conventional stock indices. However, we do not observe any significant differences in return predictability between Islamic and conventional stocks in different market conditions, including the financial crisis of 2007–08 and the COVID-19 pandemic.
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