TITLE:
ESG Indices Efficiency in Five MENA Countries: Application of the Hurst Exponent
AUTHORS:
Mouncif Harabida, Bouchra Radi, Jean-Pierre Gueyie
KEYWORDS:
Efficient Market Hypothesis, Hurst Exponent, Long-Term Dependence, ESG Indices, Conventional Indices, MENA Region
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.2,
March
6,
2023
ABSTRACT: The efficient market
hypothesis (EMH) is one of the main theories related to financial markets. This
hypothesis is based on the idea that stock prices already reflect all available
market information. In its weak form, the EMH states that future prices cannot
be predicted by analyzing historical asset prices. This paper aims to test the
effectiveness of environmental, social and governance
(ESG) indices in the Middle East and North Africa
region (MENA) and compare them with their conventional counterparts.
The sample data covers the period from September 27 2018 to December 23 2021 in
daily frequency. Our empirical approach is based on Hurst behavior using the
R/S statistic. The results reject the market efficiency hypothesis for both ESG
and conventional indices and show that these indices are significantly
inefficient with persistent returns. In terms of the level of efficiency
between the ESG and conventional indices, the study does not indicate
significant differences.