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The vicissitudes of stock markets and business cycles: focusing on the OIC region

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  • Shaista Arshad

Abstract

The tremendous growth of emerging and developing markets brings forth new arenas of research. One untouched region is the study of business cycle comovements with stock market volatility within the Organization of Islamic Cooperation (OIC) member countries. The OIC comprises of several rapidly growing industries attracting several Foreign Direct Investments. The emerging nature of the markets and the rapid influx of Foreign Direct Investment bring about the question of how business cycles in the OIC member countries react to variations in the stock market. Taking 11 OIC member countries, we first derive their business cycle using the Christiano--Fitzgerald filter and then compare this to the decomposed (using wavelet) stock market volatility (using exponential generalized autoregressive conditional heteroscedasticity (EGARCH)) representing two timescales, short-term and long-term, to see the impact of business cycle phases on short-term and long-term traders. We find for several of our countries that stock markets remain volatile during economic growth and increase in volatility during recession periods.

Suggested Citation

  • Shaista Arshad, 2016. "The vicissitudes of stock markets and business cycles: focusing on the OIC region," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 9(1), pages 56-74, March.
    • Handle: RePEc:taf:macfem:v:9:y:2016:i:1:p:56-74
    DOI: 10.1080/17520843.2014.989247
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    References listed on IDEAS

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    1. Ercan Balaban, 1995. "Some Empirics of the Turkish Stock Market," Discussion Papers 9508, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    2. Hassan B. Ghassan & Hassan R. Alhajhoj & Mohammed Kbiri Alaoui, 2013. "The impacts of International Financial Crisis on Saudi Arabia Economy: Evidence from Asymmetric SVAR modelling," Journal of Reviews on Global Economics, Lifescience Global, vol. 2, pages 390-406.
    3. Boriss Siliverstovs & Manh Ha Duong, 2006. "On the Role of Stock Market for Real Economic Activity," Discussion Papers of DIW Berlin 599, DIW Berlin, German Institute for Economic Research.
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    Cited by:

    1. Anna Solms & Bernd Süssmuth, 2022. "Business cycle characteristics of Mediterranean economies: a secular trend and cycle dynamics perspective," International Economics and Economic Policy, Springer, vol. 19(4), pages 825-862, October.

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