Testing for efficiency in the Saudi stock market: does corporate governance change matter?

Mamdouh Abdulaziz Saleh Al-Faryan*, Everton Dockery

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

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    Abstract

    We study the informational efficiency of the Saudi stock market (SSM), while accounting for corporate governance change, based on single, multiple, and variance ratio-based WALD tests and runs test. The main results show that when the whole period is considered the hypothesis of random walk is rejected, but when divided into two sub-periods separated by the pre-corporate governance and the period marked by corporate governance change, the analysis demonstrates sub-period improvement in weak-form efficiency for the examined series. Robustness of results is verified by analysis using sector indices which point to market efficiency. Interestingly, Hurst exponent estimates evidence long-range dependence which suggests the predictability of stock prices and the prospect of speculative opportunities.
    Original languageEnglish
    Pages (from-to)61-90
    Number of pages30
    JournalReview of Quantitative Finance and Accounting
    Volume57
    Early online date27 Oct 2020
    DOIs
    Publication statusPublished - 1 Jul 2021

    Keywords

    • Saudi stock market
    • corporate governance
    • market efficiency
    • random walk
    • variance ratio
    • Hurst exponent

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