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Dynamic relationships between Middle East stock markets

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Author Info

  • Christos Floros

Abstract

Purpose – The aim of this paper is to examine the dynamic relationships between Middle East stock markets. Design/methodology/approach – Daily data from the Egyptian (CMA) and Israeli Tel Aviv Stock Exchange (TASE-100) stock indices are considered. The paper employs a Bivariate cointegration GARCH(1,1) model to explain price discovery and lead-lag relationships for the period July 1997 – August 2007. Findings – Empirical results confirm that the Egyptian market plays a price discovery role, implying that CMA prices contain useful information about TASE-100 prices. CMA market is more informationally efficient than TASE-100 market. Further, CMA index reflects new information faster than TASE-100 index. Research limitations/implications – Future research should examine the dynamic relationships between Middle East stock markets using intraday (high frequency) data and recent dynamic (long memory) methods. Practical implications – The findings are helpful to financial managers and traders dealing with Middle East stock markets. Originality/value – The contribution of this paper is to provide evidence on the stock market dynamics and financial linkages between two Middle East emerging markets using recent daily data and a modern econometric model. To the best of the author's knowledge, no previous study has tested the dynamic relationships between daily prices of CMA and TASE-100.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal International Journal of Islamic and Middle Eastern Finance and Management.

Volume (Year): 4 (2011)
Issue (Month): 3 (August)
Pages: 227-236

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Handle: RePEc:eme:imefpp:v:4:y:2011:i:3:p:227-236

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Web page: http://www.emeraldinsight.com

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Related research

Keywords: Economic fluctuations; Middle East; Price linkages; Share prices; Stock markets; Stock prices;

References

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  1. Taylor, Mark P & Tonks, Ian, 1989. "The Internationalisation of Stock Markets and the Abolition of U.K. Exchange Control," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 332-36, May.
  2. Manolis G. Kavussanos & Ilias D. Visvikis & Panayotis D. Alexakis, 2008. "The Lead-Lag Relationship Between Cash and Stock Index Futures in a New Market," European Financial Management, European Financial Management Association, vol. 14(5), pages 1007-1025.
  3. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
  4. Aktham I. Maghyereh & Haitham A. Al-Zoubi, 2006. "Value-at-risk under extreme values: the relative performance in MENA emerging stock markets," International Journal of Managerial Finance, Emerald Group Publishing, vol. 2(2), pages 154-172, July.
  5. 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.
  6. Christos Floros, 2005. "Price Linkages Between the US, Japan and UK Stock Markets," Financial Markets and Portfolio Management, Springer, vol. 19(2), pages 169-178, August.
  7. Kasa, Kenneth, 1992. "Common stochastic trends in international stock markets," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 95-124, February.
  8. Haque Mahfuzul & Hassan M. Kabir & Maroney Neal C & Sackley William H, 2004. "An Empirical Examination of Stability, Predictability, and Volatility of Middle Eastern and African Emerging Stock Markets," Review of Middle East Economics and Finance, De Gruyter, vol. 2(1), pages 18-41, April.
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