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

Mamdouh Abdulaziz Sa Al-Faryan and Everton Dockery
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Everton Dockery: University of Portsmouth

Review of Quantitative Finance and Accounting, 2021, vol. 57, issue 1, No 3, 90 pages

Abstract: 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 findings indicate that when the whole period is considered, the random walk hypothesis 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.

Keywords: Saudi stock market; Corporate governance; Market efficiency; Random walk; Variance ratio; Hurst exponent (search for similar items in EconPapers)
JEL-codes: G14 G15 G34 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11156-020-00939-0

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