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Modeling cross-correlations and efficiency of Islamic and conventional banks from Saudi Arabia: Evidence from MF-DFA and MF-DXA approaches

Walid Mensi, Atef Hamdi, Syed Jawad Hussain Shahzad (), Muhammad Shafiullah and Al-Yahyaee, Khamis Hamed

Physica A: Statistical Mechanics and its Applications, 2018, vol. 502, issue C, 576-589

Abstract: This paper analyzes the dynamic efficiency and interdependence of Islamic and conventional banks of Saudi Arabia. This analysis applies the Multifractal Detrended Fluctuation Analysis (MF-DFA) and Multifractal Detrended Cross-Correlation Analysis (MF-DXA) approaches. The MF-DFA results show strong multifractality in the daily returns of Saudi banks. Moreover, all eight banks studied exhibit persistence correlation, which demonstrates inefficiency. The rolling window results show significant change in the inefficiency levels over the time. The cross-correlation analysis between bank-pairs exhibits long term interdependence between most of them. These findings indicate that the banking sector in Saudi Arabia suffers from inefficiency and exhibits long term memory.

Keywords: Efficient market hypothesis; Banking sector; Rolling window analysis; MF-DFA; MF-DXA (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2018
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