Advanced Search
MyIDEAS: Login

On the relationship between economic freedom and equity returns in the emerging markets: Evidence from the Middle East and North Africa (MENA) stock markets

Contents:

Author Info

  • Smimou, Kamal
  • Karabegovic, Amela
Registered author(s):

    Abstract

    Although the relationship between economic freedom and equity returns has been investigated in the literature, the Middle East and North Africa (MENA) equity markets were usually excluded. The aim of this paper is to fill in this gap by examining the relationship between economic freedom index and equity market returns after accounting for a number of control variables. Evidence shows that changes in economic freedom have a positive impact on equity market returns, which are not explained by business-cycle control variables related to expected returns, and that legal structure and security of property rights have the most significant impact.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/B6W69-4Y646MF-1/2/3d2911158816cf9d299aaec14960781b
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Emerging Markets Review.

    Volume (Year): 11 (2010)
    Issue (Month): 2 (June)
    Pages: 119-151

    as in new window
    Handle: RePEc:eee:ememar:v:11:y:2010:i:2:p:119-151

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/inca/620356

    Related research

    Keywords: Economic freedom International finance Property rights Rule of law Economic growth MENA region;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    2. Rui Castro & Gian Luca Clementi & Glenn MacDonald, 2004. "Investor Protection, Optimal Incentives, and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 1131-1175, August.
    3. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2007. "Liquidity and Expected Returns: Lessons from Emerging Markets," Review of Financial Studies, Society for Financial Studies, vol. 20(6), pages 1783-1831, November.
    4. Gwartney, James & Lawson, Robert, 2003. "The concept and measurement of economic freedom," European Journal of Political Economy, Elsevier, vol. 19(3), pages 405-430, September.
    5. Kortas, Mohamed & L'Her, Jean-Francois & Roberge, Mathieu, 2005. "Country selection of emerging equity markets: benefits from country attribute diversification," Emerging Markets Review, Elsevier, vol. 6(1), pages 1-19, April.
    6. Thomas Lagoarde-Segot & Brian M. Lucey, 2009. "Shift-contagion Vulnerability in the MENA Stock Markets," The World Economy, Wiley Blackwell, vol. 32(10), pages 1478-1497, October.
    7. Doucouliagos, Chris & Ulubasoglu, Mehmet Ali, 2006. "Economic freedom and economic growth: Does specification make a difference?," European Journal of Political Economy, Elsevier, vol. 22(1), pages 60-81, March.
    8. Buckberg, Elaine, 1995. "Emerging Stock Markets and International Asset Pricing," World Bank Economic Review, World Bank Group, vol. 9(1), pages 51-74, January.
    9. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
      • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
      • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
      • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    10. Rajan, Murli & Friedman, Joseph, 1997. "An examination of the impact of country risk on the international portfolio selection decision," Global Finance Journal, Elsevier, vol. 8(1), pages 55-70.
    11. Lagoarde-Segot, Thomas & Lucey, Brian M., 2007. "International portfolio diversification: Is there a role for the Middle East and North Africa?," Journal of Multinational Financial Management, Elsevier, vol. 17(5), pages 401-416, December.
    12. Keim, Donald B. & Stambaugh, Robert F., 1986. "Predicting returns in the stock and bond markets," Journal of Financial Economics, Elsevier, vol. 17(2), pages 357-390, December.
    13. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    14. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
    15. James D . Gwartney & Randall G . Holcombe & Robert A . Lawson, 2006. "Institutions and the Impact of Investment on Growth," Kyklos, Wiley Blackwell, vol. 59(2), pages 255-273, 05.
    16. Dawson, John W, 1998. "Institutions, Investment, and Growth: New Cross-Country and Panel Data Evidence," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 603-19, October.
    17. Soofi Abdol S, 2008. "Global Financial Integration and the MENA Countries: Evidence from Equity and Money Markets," Review of Middle East Economics and Finance, De Gruyter, vol. 4(2), pages 93-116, April.
    18. Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad, 2003. "Equity market liberalization in emerging markets," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 53-74.
    19. Easton, Stephen T & Walker, Michael A, 1997. "Income, Growth, and Economic Freedom," American Economic Review, American Economic Association, vol. 87(2), pages 328-32, May.
    20. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December.
    21. Dybvig, Philip H & Ross, Stephen A, 1985. " Yes, the APT Is Testable," Journal of Finance, American Finance Association, vol. 40(4), pages 1173-88, September.
    22. Bekaert, Geert & Harvey, Campbell R., 2003. "Emerging markets finance," Journal of Empirical Finance, Elsevier, vol. 10(1-2), pages 3-56, February.
    23. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
    24. Barry, Christopher B. & Rodriguez, Mauricio, 2004. "Risk and return characteristics of property indices in emerging markets," Emerging Markets Review, Elsevier, vol. 5(2), pages 131-159, June.
    25. Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," William Davidson Institute Working Papers Series 79, William Davidson Institute at the University of Michigan.
    26. Bekaert, Geert & Harvey, Campbell R., 2002. "Research in emerging markets finance: looking to the future," Emerging Markets Review, Elsevier, vol. 3(4), pages 429-448, December.
    27. Hagelin, Niclas & Pramborg, Bengt, 2004. "Dynamic investment strategies with and without emerging equity markets," Emerging Markets Review, Elsevier, vol. 5(2), pages 193-215, June.
    28. Marshall L. Stocker, 2005. "Equity Returns And Economic Freedom," Cato Journal, Cato Journal, Cato Institute, vol. 25(3), pages 583-594, Fall.
    29. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
    30. Alessandro Romagnoli & Luisa Mengoni, 2009. "The challenge of economic integration in the MENA region: from GAFTA and EU-MFTA to small scale Arab Unions," Economic Change and Restructuring, Springer, vol. 42(1), pages 69-83, May.
    31. Ali F. Darrat & Khaled Elkhal & Sam R. Hakim, 2000. "On the Integration of Emerging Stock Markets in the Middle East," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 25(2), pages 119-129, December.
    32. Chang, Eui Jung & Lima, Eduardo Jose Araujo & Tabak, Benjamin Miranda, 2004. "Testing for predictability in emerging equity markets," Emerging Markets Review, Elsevier, vol. 5(3), pages 295-316, September.
    33. Domowitz, Ian & Glen, Jack & Madhavan, Ananth, 1997. " Market Segmentation and Stock Prices: Evidence from an Emerging Market," Journal of Finance, American Finance Association, vol. 52(3), pages 1059-85, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Lucey, Brian M. & Muckley, Cal, 2011. "Robust global stock market interdependencies," International Review of Financial Analysis, Elsevier, vol. 20(4), pages 215-224, August.
    2. Wajih Khallouli & Modibo René Sandretto, 2010. "Testing for “contagion” of the subprime crisis on the Middle East and North African stock markets : A Markov Switching EGARCH approach," Working Papers 1022, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:ememar:v:11:y:2010:i:2:p:119-151. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.