Memory Effects on Saudi Arabian Stock Market – Empirical Evidence

Khalid ALKHATHLAN, Sella PRABAKARAN

Abstract


This paper makes a serious endeavor to investigate whether there exists a need to study the use of non-linear models to test the survival of memory effects in a developing stock market like Saudi Arabia, performing thereon the various statistical tests for the normality of data. It also discussing how various authors are challenging the efficient market hypothesis. This has led to the use of non-linear dynamic systems for modeling movement in stock prices. In order to confirm whether the efficient market hypothesis is applicable to the Saudi Arabian Stock Market, the study has used the TADAWUL returns for the last two decade and tested them for normality. And also find out the various features of the logarithmic return spectrum of the Saudi Arabian stock markets. It also scrutinizes the possible existence of dependencies and memory effects in the return processes. In particular, it performs Rescaled Range (R/S) analysis. The results throw up several intriguing issues of relevance to portfolio managers, stock market players and analysts and academicians.

 

Key Words: EMH, Chaos, Brownian Motion, R/S method, TASI     


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DOI: https://doi.org/10.5296/erm.v1i2.116

Enterprise Risk Management  ISSN 1937-7916

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