IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Financial crises, stock returns and volatility in an emerging stock market: the case of Jordan

Listed author(s):
  • Samer AM Al-Rjoub

Purpose - The purpose of this paper is to empirically examine stock returns behavior during financial crises for an emerging market from 1992 to 2009. The authors identify episodes of significant price declines “crashes” and watch the stock price behavior during these episodes. Design/methodology/approach - This paper examines seven historical episodes of stock market crashes and their aftermath in the ASE over the last 18 years. The authors examine the behavior of stock returns and volatility in ASE during global, regional and local events. For this purpose the GARCH-M model is used to capture changes in variance. The data covers the period from January 1, 1992 to July 2, 2009 with different data frequency of daily, weekly and monthly closing prices for ASE general weighted price index. The authors use the crisis specification adopted by Mishkin and White where they define stock market crash as 20 percent decline in the stock market, and the one adopted by Patel and Sarker where they use a 35 percent or more fall in emerging stock market from its historical maximum as a definition of stock market crash, and the authors extend by adopting a third scenario to account only for the 2008-2009 crisis. Findings - The results show that crises in general have negative impact on stock returns for all sectors, with the banking sector being the most affected. The effect of the 2008-2009 crash is the most severe, with the largest drop in stock prices and high volatilities. The paper provides an evidence of high persistence in volatility and strong reverse relationship between stock return and its volatility before and after the crises. Research limitations/implications - The paper does not include rest-of-the-world economies. Practical implications - Stock return behavior change around financial crises, it can help the investment world and the academics predict stock return behavior and the dynamics of the first two moments during crises. Originality/value - The authors use three crisis specifications in one paper adopted by Mishkin and White (2002), Patel and Sarker (1998) and extend by adopting a third scenario to account only for the 2008-2009 crisis. The paper tests for robustness of the results using daily, weekly, and monthly frequencies. Few studies have examined the behavior of stock returns and volatility during financial crises with the majority of work done on developed markets.

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:
Download Restriction: Access to full text is restricted to subscribers

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 Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 39 (2012)
Issue (Month): 2 (May)
Pages: 178-211

in new window

Handle: RePEc:eme:jespps:v:39:y:2012:i:2:p:178-211
Contact details of provider: Web page:

Order Information: Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Web: Email:

No references listed on IDEAS
You can help add them by filling out this form.

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:eme:jespps:v:39:y:2012:i:2:p:178-211. 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)

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.