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The impact of foreign equity flows on market volatility during politically tranquil and turbulent times: The Egyptian experience

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  • Ahmed, Walid M.A.

Abstract

Since the popular uprising of January 2011, a series of momentous events has rocked Egypt’s political order, jeopardising the country’s economic and financial stability. This study examines the role of foreign capital flows in the volatility of the Egyptian equity market, and whether this role has changed due to the recent domestic political unrest. These issues are empirically addressed in the context of GMM estimation. The results suggest that, unlike those of foreign individual investors, trades of foreign institutional investors contribute to market fluctuations, whether prior to or following the January 2011 uprising. Sell trades by foreign individual and institutional investors exert a significant influence on volatility. Further, when volume is split into its anticipated and unanticipated components, the results show that surprises in trading activity by either group tend to exacerbate volatility in periods of calm and turmoil. These findings are broadly insensitive to volatility measures and robust, even after controlling for a variety of relevant determinants of market volatility. The evidence documented in this study provides important implications for policy markers.

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  • Ahmed, Walid M.A., 2017. "The impact of foreign equity flows on market volatility during politically tranquil and turbulent times: The Egyptian experience," Research in International Business and Finance, Elsevier, vol. 40(C), pages 61-77.
  • Handle: RePEc:eee:riibaf:v:40:y:2017:i:c:p:61-77
    DOI: 10.1016/j.ribaf.2016.12.006
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    Cited by:

    1. Vo, Xuan Vinh, 2017. "Trading of foreign investors and stock returns in an emerging market - Evidence from Vietnam," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 88-93.
    2. Gutierrez, Juan P. & Vianna, Andre C., 2020. "Price effects of steel commodities on worldwide stock market returns," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).

    More about this item

    Keywords

    Political events; Market volatility; Egypt; Foreign equity flows; Buy and sell trades; Generalised Method of Moments (GMM);

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets

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