IDEAS home Printed from
   My bibliography  Save this paper

Equity market integration in the Middle East and North Africa: in search for diversification benefits


  • Brian Lucey
  • Thomas Lagoarde-Segot


The purpose of this paper is to investigate the MENA’s potential for portfolio diversification benefits by examining long run equity linkages with daily data over the 1998-2004 periods. Our analysis is based on several co-integration analyses and an extension of Akdogan measures of financial integration. We first compare financial integration with the EU and the US. Results suggest that the MENA region is growingly segmented from both regions. Although integration is relatively higher with the EMU, diversification benefits for both EU and US investors are possible since segmentation levels appear converging. At the country level, our analysis displays no evidence of regional integration, thereby suggesting potential for local diversification. Integration scores also show that Egypt and Turkey should be relatively more appealing for the US investor and Israel, and Jordan and Morocco for the EU investor. Lebanon and Tunisia are two specific cases displaying opposite dynamics. A moving average analysis also shows that financial events, internal reforms and political shocks do not affect the region stock market linkages homogeneously; real economic integration seems to diminish financial segmentation. Finally, we approach the issue of short run linkages with a VAR-VECM methodology. Impulse response analysis shows that all markets seem to respond to each other, but that Turkey is unaffected by shocks occurring in the other markets. This ultimately raises questions on the dynamics of intra-regional contagion.

Suggested Citation

  • Brian Lucey & Thomas Lagoarde-Segot, 2005. "Equity market integration in the Middle East and North Africa: in search for diversification benefits," The Institute for International Integration Studies Discussion Paper Series iiisdp071, IIIS.
  • Handle: RePEc:iis:dispap:iiisdp071

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Stock Market Integration; Portfolio Diversification; MENA markets; Time-varying methods.;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:iis:dispap:iiisdp071. 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: (Colette Keleher). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.