Stock Markets Turmoil: Worldwide Effects of Middle East Conflicts
AbstractIn this article, we analyze the impact of recent political conflicts in the Middle East on stock markets worldwide. In particular, we study how political instability––mainly due to the war in Iraq––has affected long-term volatility of stock markets. In doing so, we utilize two approaches to detecting structural breakpoints in volatility: Inclan and Tiao’s Iterative Cumulative Sum of Squares (ICSS) algorithm and wavelet-based variante analysis. After controlling for conditional heteroskedasticity and serial correlation in returns, we conclude that Middle East conflicts have had an impact primarily on the stock markets of countries in that region and emerging Asian countries (e.g., Turkey, Morocco, Egypt, Pakistan, and Indonesia). Further evidence, from an international version of the CAPM, shows that political instability in the Middle East has increased the sensitivity of stock markets to exchange rate risk and, to a lesser extent, to market risk (e.g., Pakistan and Spain).
Download InfoIf 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.
Bibliographic InfoPaper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 215.
Date of creation: 2005
Date of revision:
Other versions of this item:
- Viviana Fernandez, 2007. "Stock Market Turmoil: Worldwide Effects of Middle East Conflicts," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 43(3), pages 58-102, June.
- NEP-ALL-2006-01-24 (All new papers)
- NEP-CWA-2006-01-24 (Central & Western Asia)
- NEP-FMK-2006-01-24 (Financial Markets)
- NEP-RMG-2006-01-24 (Risk Management)
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.:
- Lin Shinn-Juh & Stevenson Maxwell, 2001. "Wavelet Analysis of the Cost-of-Carry Model," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 5(1), pages 1-17, April.
- Ser-Huang Poon & Clive W.J. Granger, 2003. "Forecasting Volatility in Financial Markets: A Review," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 478-539, June.
- Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 33-55, March.
- Connor Jeff & Rossiter Rosemary, 2005. "Wavelet Transforms and Commodity Prices," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(1), pages 1-22, March.
- Ramsey James B., 2002. "Wavelets in Economics and Finance: Past and Future," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(3), pages 1-29, November.
- Gençay, Ramazan & Selçuk, Faruk & Whitcher, Brandon, 2001. "Differentiating intraday seasonalities through wavelet multi-scaling," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 289(3), pages 543-556.
- Lamoureux, Christopher G & Lastrapes, William D, 1990. "Persistence in Variance, Structural Change, and the GARCH Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 225-34, April.
- Efe Çağlar Çağli & Pinar Evrim Mandaci & Pinar Hakan Kahyaoğlu, 2011. "Volatility Shifts and Persistence in Variance: Evidence from the Sector Indices of Istanbul Stock Exchange," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 4(3), pages 119-140, December.
- Morales, Lucía & Gassie, Esmeralda, 2011. "Structural breaks and financial volatility: Lessons from BRIC countries," IAMO Forum 2011: Will the "BRICs Decade" Continue? â Prospects for Trade and Growth 13, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
- Lau, Chi Keung Marco & Demir, Ender & Bilgin, Mehmet Huseyin, 2013. "Experience-based corporate corruption and stock market volatility: Evidence from emerging markets," Emerging Markets Review, Elsevier, vol. 17(C), pages 1-13.
- Viviana Fernández, 2007. "The behavior of stock returns in the Asia-Pacific mining industry following the Iraq war," Documentos de Trabajo 243, Centro de Economía Aplicada, Universidad de Chile.
- Jean-Pascal Bassino & Thomas Lagoarde-Segot, 2013. "Trading patterns at the Tokyo Stock Exchange, 1931-1940," CEH Discussion Papers 012, Centre for Economic History, Research School of Economics, Australian National University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.