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The Jordanian Stock Market--Should You Invest in it for Risk Diversification or Performance?

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Author Info
Martin Petri
Tahsin Saadi-Sedik

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Abstract

We analyze the performance of the Amman Stock Exchange (ASE) and its integration with other markets. Using cointegration techniques, we find that the ASE and other Arab stock markets are cointegrated, which implies little long-run risk diversification. However, there is no cointegrating relationship between the ASE and other emerging or developed stock markets. Two of the main regional stock markets-Kuwait and Saudi Arabia-Grangercause the Jordanian stock market. The paper finds that there may have been some overvaluation at end-2005, but that the market correction in early 2006 and strong recent earnings growth have reduced overvaluation concerns.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/187.

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Length: 38 pages
Date of creation: 14 Aug 2006
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Handle: RePEc:imf:imfwpa:06/187

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Keywords: Jordan stock market integration cointegration common trends Stock markets Jordan Investment

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  2. Eun, Cheol S & Resnick, Bruce G, 1984. " Estimating the Correlation Structure of International Share Prices," Journal of Finance, American Finance Association, vol. 39(5), pages 1311-24, December. [Downloadable!] (restricted)
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  6. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September. [Downloadable!] (restricted)
  7. repec:rus:hseeco:278562 is not listed on IDEAS
  8. Kasa, Kenneth, 1992. "Common stochastic trends in international stock markets," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 95-124, February. [Downloadable!] (restricted)
  9. Richards, Anthony J., 1995. "Comovements in national stock market returns: Evidence of predictability, but not cointegration," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 631-654, December. [Downloadable!] (restricted)
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  10. Topol, Richard, 1991. "Bubbles and Volatility of Stock Prices: Effect of Mimetic Contagion," Economic Journal, Royal Economic Society, vol. 101(407), pages 786-800, July. [Downloadable!] (restricted)
  11. Chen, Gong-meng & Firth, Michael & Meng Rui, Oliver, 2002. "Stock market linkages: Evidence from Latin America," Journal of Banking & Finance, Elsevier, vol. 26(6), pages 1113-1141, June. [Downloadable!] (restricted)
  12. Engle, Robert F & Hendry, David F & Richard, Jean-Francois, 1983. "Exogeneity," Econometrica, Econometric Society, vol. 51(2), pages 277-304, March. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Andreas Billmeier & Isabella Massa, 2007. "Go Long or Short in Pyramids? News from the Egyptian Stock Market," IMF Working Papers 07/179, International Monetary Fund. [Downloadable!]
  2. Andreas Billmeier & Isabella Massa, 2007. "What Drives Stock Market Development in the Middle East and Central Asia--Institutions, Remittances, or Natural Resources?," IMF Working Papers 07/157, International Monetary Fund. [Downloadable!]
  3. Martin Petri & Tahsin Saadi-Sedik, 2006. "To Smooth or Not to Smooth - The Impact of Grants and Remittances on the Equilibrium Real Exchange Rate in Jordan," IMF Working Papers 06/257, International Monetary Fund. [Downloadable!]
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