This paper studies excess market returns in the relatively understudied nancial markets of nine Middle Eastern and North African (MENA) countries within the context of three variants of the Capital Asset Pricing Model: the static international CAPM; the constant-parameter intertemporal CAPM; and a Markov-switching intertemporal CAPM which allows for the degree of integration with international equity markets to be time-varying. On the whole we nd that: (1) Israel and Turkey are most strongly integrated with world nancial markets; (2) in most other MENA markets examined there is primarily local pricing of risk and evidence of a positive risk-return trade-o; and (3) there is substantial time variation in the weights on local and global pricing of risk for all of these markets. Our results suggest that investment in many of these markets over the sample studied would have provided returns uncor- related with global markets, and thus would have served as nancial instruments with which portfolio diversication could have been improved.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
13437.
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.:
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.)