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, Khamis Hamed Al-Yahyaee

Research output: Contribution to journalArticle

1 Citation (Scopus)

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.

Original languageEnglish
Pages (from-to)576-589
Number of pages14
JournalPhysica A: Statistical Mechanics and its Applications
Volume502
DOIs
Publication statusPublished - Jul 15 2018

Fingerprint

Saudi Arabia
Cross-correlation
cross correlation
Fluctuations
Correlation Analysis
Modeling
sectors
Multifractality
Memory Term
Banking
Persistence
Sector
Banks
Evidence
Term
Demonstrate

Keywords

  • Banking sector
  • Efficient market hypothesis
  • MF-DFA
  • MF-DXA
  • Rolling window analysis

ASJC Scopus subject areas

  • Statistics and Probability
  • Condensed Matter Physics

Cite this

Modeling cross-correlations and efficiency of Islamic and conventional banks from Saudi Arabia : Evidence from MF-DFA and MF-DXA approaches. / Mensi, Walid; Hamdi, Atef; Shahzad, Syed Jawad Hussain; Shafiullah, Muhammad; Al-Yahyaee, Khamis Hamed.

In: Physica A: Statistical Mechanics and its Applications, Vol. 502, 15.07.2018, p. 576-589.

Research output: Contribution to journalArticle

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