IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

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

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

    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.

    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/pii/S1566-0141(10)00011-7
    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.

    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

    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. Bekaert, Geert & Harvey, Campbell R., 2003. "Emerging markets finance," Journal of Empirical Finance, Elsevier, vol. 10(1-2), pages 3-56, February.
    2. Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, 04.
    3. 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.
    4. 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 1059-1085, July.
    5. 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.
    6. repec:hrv:faseco:30728041 is not listed on IDEAS
    7. 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.
    8. 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.
    9. 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.
    10. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    11. 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.
    12. Marshall L. Stocker, 2005. "Equity Returns And Economic Freedom," Cato Journal, Cato Journal, Cato Institute, vol. 25(3), pages 583-594, Fall.
    13. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    14. Rui Castro & Gian Luca Clementi & Glenn MacDonald, 2004. "Investor Protection, Optimal Incentives, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 1131-1175.
    15. 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.
    16. Buckberg, Elaine, 1995. "Emerging Stock Markets and International Asset Pricing," World Bank Economic Review, World Bank Group, vol. 9(1), pages 51-74, January.
    17. 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.
    18. Billmeier, Andreas & Massa, Isabella, 2009. "What drives stock market development in emerging markets--institutions, remittances, or natural resources?," Emerging Markets Review, Elsevier, vol. 10(1), pages 23-35, March.
    19. Easton, Stephen T & Walker, Michael A, 1997. "Income, Growth, and Economic Freedom," American Economic Review, American Economic Association, vol. 87(2), pages 328-332, May.
    20. 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.
    21. 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.
    22. 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.
    23. 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 603-619, October.
    24. 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.
    25. 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.
    26. Geert Bekaert & Campbell Harvey & Christian T. Lundblad, 2003. "Equity market liberalization in emerging markets," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 53-74.
    27. 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.
    28. 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.
    29. 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.
    30. 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.
    31. Billmeier, Andreas & Massa, Isabella, 2008. "Go long or short in pyramids? News from the Egyptian stock market," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 949-970, December.
    32. 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.
    33. Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
    34. 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.
    35. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    36. Dybvig, Philip H & Ross, Stephen A, 1985. " Yes, the APT Is Testable," Journal of Finance, American Finance Association, vol. 40(4), pages 1173-1188, September.
    Full references (including those not matched with items on IDEAS)

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

    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: (Dana Niculescu)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.