An Empirical Investigation of Stock Market Behavior in the Middle East and North Africa
This paper studies excess market returns in the relatively understudied nancial markets of nine Middle Eastern and North African (MENA) countries within the context of three variants of the Capital Asset Pricing Model: the static international CAPM; the constant-parameter intertemporal CAPM; and a Markov-switching intertemporal CAPM which allows for the degree of integration with international equity markets to be time-varying. On the whole we nd that: (1) Israel and Turkey are most strongly integrated with world nancial markets; (2) in most other MENA markets examined there is primarily local pricing of risk and evidence of a positive risk-return trade-o; and (3) there is substantial time variation in the weights on local and global pricing of risk for all of these markets. Our results suggest that investment in many of these markets over the sample studied would have provided returns uncor- related with global markets, and thus would have served as nancial instruments with which portfolio diversication could have been improved.
|Date of creation:||05 Feb 2009|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-887, September.
- Pan, Jun, 2002. "The jump-risk premia implicit in options: evidence from an integrated time-series study," Journal of Financial Economics, Elsevier, vol. 63(1), pages 3-50, January.
- Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993.
"On the relation between the expected value and the volatility of the nominal excess return on stocks,"
157, Federal Reserve Bank of Minneapolis.
- Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
- Whitney K. Newey & Kenneth D. West, 1986.
"A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix,"
NBER Technical Working Papers
0055, National Bureau of Economic Research, Inc.
- Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-708, May.
- Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996.
"Efficient Tests for an Autoregressive Unit Root,"
Econometric Society, vol. 64(4), pages 813-836, July.
- Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
- Elliott, Graham, 1999. "Efficient Tests for a Unit Root When the Initial Observation Is Drawn from Its Unconditional Distribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 767-783, August.
- Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
- Tom Doan, "undated". "ERSTEST: RATS procedure to perform Elliott-Rothenberg-Stock unit root tests," Statistical Software Components RTS00066, Boston College Department of Economics.
- Tom Doan, "undated". "GLSDETREND: RATS procedure to perform local to unity GLS detrending," Statistical Software Components RTS00077, Boston College Department of Economics.
- Hinich, Melvin J. & Serletis, Apostolos, 2007. "Episodic Nonlinear Event Detection in the Canadian Exchange Rate," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 68-74, March.
- Ghysels, Eric & Cherkaoui, Mouna, 2003. "Emerging markets and trading costs: lessons from Casablanca," Journal of Empirical Finance, Elsevier, vol. 10(1-2), pages 169-198, February.
- Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad & Stephan Siegel, 0.
"What Segments Equity Markets?,"
Review of Financial Studies,
Society for Financial Studies, vol. 24(12), pages 3841-3890.
- Geert Bekaert & Campbell R. Harvey & Christian Lundblad & Stephan Siegel, 2009. "What Segments Equity Markets?," NBER Working Papers 14802, National Bureau of Economic Research, Inc.
- Bekaert, Geert & Harvey, Campbell & Lundblad, Christian T & Siegel, Stephan, 2010. "What Segments Equity Markets?," CEPR Discussion Papers 8142, C.E.P.R. Discussion Papers.
- Geert Bekaert & Campbell R. Harvey & Christian T. Lundblad & Stephan Siegel, 2010. "What Segments Equity Markets?," National Bank of Poland Working Papers 76, National Bank of Poland, Economic Institute.
- Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
- Bekaert, Geert & Harvey, Campbell R, 1995.
" Time-Varying World Market Integration,"
Journal of Finance,
American Finance Association, vol. 50(2), pages 403-444, June.
- Eric Ghysels & Pedro Santa-Clara & Rossen Valkanov, 2004.
"There is a Risk-Return Tradeoff After All,"
NBER Working Papers
10913, National Bureau of Economic Research, Inc.
- James D. Hamilton, 1985. "Historical Causes of Postwar Oil Shocks and Recessions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 97-116.
- Binder, John J, 1998. "The Event Study Methodology since 1969," Review of Quantitative Finance and Accounting, Springer, vol. 11(2), pages 111-137, September.
- Geert Bekaert & Campbell R. Harvey, 1995.
"Emerging Equity Market Volatility,"
NBER Working Papers
5307, National Bureau of Economic Research, Inc.
- Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
- Errunza, Vihang, 2001. "Foreign Portfolio Equity Investments, Financial Liberalization, and Economic Development," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 703-726, November.
- Harvey, Campbell R, 1991. " The World Price of Covariance Risk," Journal of Finance, American Finance Association, vol. 46(1), pages 111-157, March.
- Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
- Hamilton, James D., 2003.
"What is an oil shock?,"
Journal of Econometrics,
Elsevier, vol. 113(2), pages 363-398, April.
- Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-984, June.
- Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March.
- C. Emre Alper, 2001. "The Turkish Liquidity Crisis of 2000: What Went Wrong..," Working Papers 2001/11, Bogazici University, Department of Economics.
- Andreou, Elena & Ghysels, Eric, 2002.
"Rolling-Sample Volatility Estimators: Some New Theoretical, Simulation, and Empirical Results,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 20(3), pages 363-376, July.
- Elena Andreou & Eric Ghysels, 2000. "Rolling-Sample Volatility Estimators: Some New Theoretical, Simulation and Empirical Results," CIRANO Working Papers 2000s-19, CIRANO.
- Campbell R. Harvey, 1994.
"Predictable Risk and Returns in Emerging Markets,"
NBER Working Papers
4621, National Bureau of Economic Research, Inc.
- Errunza, Vihang & Losq, Etienne & Padmanabhan, Prasad, 1992. "Tests of integration, mild segmentation and segmentation hypotheses," Journal of Banking & Finance, Elsevier, vol. 16(5), pages 949-972, September.
- William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, 09.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:13437. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.