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Volume :8 Issue : 1 2001      Add To Cart                                                                    Download

The Return-Volume Link in the Saudi Financial Sector: A Granger Causality Test

Auther : Ali Z. Diabi & Youssef A. Al-Zamil

This Paper uses weekly data on the Saudi financial sector for the 1990.08 through 1994.03 Periods, in an attempt to inquire into the issue of information efficiency. It also employs both co-integration analysis and the Granger causality methodology to test the return-volume link. A subsidiary objective of the paper is to examine the statistical properties of both stock return and volume. The results seem to suggest that, when considering the whole sample period (i.e., 1990-1994), information conveyed by volume cannot help predict returns in the financial sector. It is rather the reverse causality (i.e., trading volume in most cases, is Granger causing return) which is more evident. However, when breaking the sample into two sub periods, the results are problematic. Overall, it appears that information efficiency is not yet evident. Perhaps, what, Karpoff (1987) suggested for other markets can be also true for the emerging Saudi stock market whose size may be blurring the return-volume link.

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