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Integration of Financial Markets: A Study of Egypt and Palestine Stock Markets

Author

Listed:
  • Abdul Razak Abdul Hadi
  • Shadi Hamad
  • Eddy Yap Tat Hiung

Abstract

The objective of this study is to determine the existence of equilibrium and dynamic relations between Egyptian Stock Exchange (EGX) and Palestine Stock Exchange (PEX). Utilising the framework of international trade theories, this paper employs the Engle-Granger Co-integration (1987) procedure as an estimation model on monthly time series data from February 1998 to April 2012. Results indicate that there is a significant equilibrium nexus between EGX and PEX but no empirical evidence was found on the existence of dynamic relations between them via Granger Causality tests. However, analysis of dynamic interactions of the post-sample period by means of Impulse-Response Functions and Variance Decomposition indicate sensitivity in EGX towards changes in PEX.

Suggested Citation

  • Abdul Razak Abdul Hadi & Shadi Hamad & Eddy Yap Tat Hiung, 2017. "Integration of Financial Markets: A Study of Egypt and Palestine Stock Markets," Applied Finance and Accounting, Redfame publishing, vol. 3(1), pages 1-10, February.
  • Handle: RePEc:rfa:afajnl:v:3:y:2017:i:1:p:1-10
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    File URL: http://redfame.com/journal/index.php/afa/article/view/1817
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    References listed on IDEAS

    as
    1. Fernandez-Izquierdo, Angeles & Lafuente, Juan Angel, 2004. "International transmission of stock exchange volatility: Empirical evidence from the Asian crisis," Global Finance Journal, Elsevier, vol. 15(2), pages 125-137, August.
    2. Naser Abdelkarim & Yasser A. Shahin & Bayan M. Arquawi, 2009. "Investor Perception of Information Disclosed in Financial Reports of Palestine Securities Exchange Listed Companies," Accounting & Taxation, The Institute for Business and Finance Research, vol. 1(1), pages 45-61.
    3. Sheng, Hsiao-Ching & Tu, Anthony H., 2000. "A study of cointegration and variance decomposition among national equity indices before and during the period of the Asian financial crisis," Journal of Multinational Financial Management, Elsevier, vol. 10(3-4), pages 345-365, December.
    4. Arshanapalli, Bala & Doukas, John, 1993. "International stock market linkages: Evidence from the pre- and post-October 1987 period," Journal of Banking & Finance, Elsevier, vol. 17(1), pages 193-208, February.
    5. Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005. "Market Integration and Contagion," The Journal of Business, University of Chicago Press, vol. 78(1), pages 39-70, January.
    6. Naser Abdelkarim & Khadija Ijbara, 2010. "Evidence On Corporate Governance Compliance By Palestine Securities Exchange Listed Firms," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 4(3), pages 73-88.
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    More about this item

    Keywords

    PEX; EGX; co-integration procedure; granger causality; stock market;

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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