Asymmetric Impacts of Macroeconomic and Policy Variables on Momentum Portfolio Return in MENA Countries: A NARDL Model Approach

This paper explores both short-term and long-term relationships between stock market performance and key macroeconomic factors and policy factors covering twelve nations within the Middle East and North African region To evaluate market efficiency, this study employs a momentum investing approach, with portfolio returns serving as the key performance metric. To capture both the symmetric and asymmetric influences of fiscal and monetary policy indicators, alongside measures of transparency and economic-political uncertainty, this study utilizes a nonlinear autoregressive distributed lag structure to assess their role in shaping stock market efficiency. The study yields three principal findings. First, evidence of cointegration is observed between portfolio returns and the variables that drive variability in the response variable, though the long-horizon equilibrium connection does not consistently display symmetry. Second, certain independent variables show asymmetrical influences over short and long time horizons, wherein positive and negative fluctuations exert differing influences on stock market efficiency. Third, macroeconomic indicators, instability in economic policy decisions, and transparency affect the efficiency of financial markets across various channels. This research underscores the importance of macroeconomic factors in forecasting stock returns.