IDEAS home Printed from https://ideas.repec.org/a/eme/imefpp/v5y2012i2p106-115.html
   My bibliography  Save this article

Market liberalization and volatility of returns in emerging markets: The case of Qatar Exchange (QSC)

Author

Listed:
  • Ritab Al-Khouri
  • Abdulkhader Abdallah

Abstract

Purpose - The purpose of this paper is to examine whether stock market liberalization creates excess stock return volatility in the Qatar Exchange (QSC). Design/methodology/approach - The study utilizes two methods, simple analysis of variance and the EGARCH model with dummy variables. Findings - Results reveal no change in market volatility following the partial removal of the restrictions on foreign participation. Results suggest, however, that the degree of persistence in volatility is high, which implies that once volatility increases it remains high over a long run. In addition, conditional volatility tends to rise when the absolute value of the standardized residuals was large. While, contrary to what has been found in the literature, the return volatility seems to be symmetric. Research limitations/implications - The finding of volatility persistence and clustering might imply an inefficient stock market. Therefore, policy makers should emphasize and direct their attention toward increasing the efficiency of the stock market. Practical implications - Being able to make predictions about financial market volatility is of special importance to investors and policy makers since it makes available to them a measure of risk exposure in their investments and decisions. Originality/value - This paper provides a contribution to the empirical literature on stock market volatility. It is the only study, to the authors' knowledge, that investigates the issue of QSC liberalization and volatility. The authors believe that QSC has its own unique characteristics, and the results of the study depend mainly on the market's specific conditions, the quality of its financial institutions and the extent of financial liberalization obtained.

Suggested Citation

  • Ritab Al-Khouri & Abdulkhader Abdallah, 2012. "Market liberalization and volatility of returns in emerging markets: The case of Qatar Exchange (QSC)," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 5(2), pages 106-115, June.
  • Handle: RePEc:eme:imefpp:v:5:y:2012:i:2:p:106-115
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/17538391211233407?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    2. Kim, E Han & Singal, Vijay, 2000. "Erratum [Stock Market Openings: Experience of Emerging Economies]," The Journal of Business, University of Chicago Press, vol. 73(4), October.
    3. Bekaert, Geert & Harvey, Campbell R., 1997. "Emerging equity market volatility," Journal of Financial Economics, Elsevier, vol. 43(1), pages 29-77, January.
    4. Farooq Malik & Bradley Ewing & James Payne, 2005. "Measuring volatility persistence in the presence of sudden changes in the variance of Canadian stock returns," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 1037-1056, August.
    5. Cunado, Juncal & Gomez Biscarri, Javier & Perez de Gracia, Fernando, 2006. "Changes in the dynamic behavior of emerging market volatility: Revisiting the effects of financial liberalization," Emerging Markets Review, Elsevier, vol. 7(3), pages 261-278, September.
    6. Engle, Robert F & Ng, Victor K, 1993. " Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-1778, December.
    7. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, pages 307-327.
    8. C. Alan Garner, 1988. "Has the stock market crash reduced consumer spending?," Economic Review, Federal Reserve Bank of Kansas City, issue Apr, pages 3-16.
    9. Konstantinos Kassimatis, 2002. "Financial liberalization and stock market volatility in selected developing countries," Applied Financial Economics, Taylor & Francis Journals, pages 389-394.
    10. Susmel, Raul, 2000. "Switching Volatility in Private International Equity Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 5(4), pages 265-283, October.
    11. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, pages 307-327.
    12. Kim, E Han & Singal, Vijay, 2000. "Stock Market Openings: Experience of Emerging Economies," The Journal of Business, University of Chicago Press, vol. 73(1), pages 25-66, January.
    13. Hamilton, James D. & Susmel, Raul, 1994. "Autoregressive conditional heteroskedasticity and changes in regime," Journal of Econometrics, Elsevier, pages 307-333.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:imefpp:v:5:y:2012:i:2:p:106-115. 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: (Virginia Chapman). General contact details of provider: http://www.emeraldinsight.com .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.