Testing the predictability of the Saudi market indices returns: Evidence from TADAWUL market

The purpose of this study is to determine whether the market index returns and sectoral indices returns in the Saudi stock market (TADAWUL) follow a random walk process as stated by the efficient market hypothesis for the years 2011-2020. The normal distribution test, runs test, variance ratio test, and Augmented Dickey-Fuller (ADF) were used to check the study hypotheses. At the weak-form level, the empirical findings reject the random walk hypothesis, indicating proving that not all historical data is completely reflected in stock prices. The study's conclusions are significant for Saudi stock market investors who are forming investment portfolios resemble to the market's portfolio.