- / In an efficient market, prices adjust instantaneously toward their fundamental values; as a
consequence prices should always reflect all available information. Here we consider market
efficiency for new emerging markets in the Middle East region. Emerging markets are typically
characterized by illiquidity, thin trading, and possibly non-linearity in returns generating process.
Firstly, we adjust observed daily indices for nine Arab stock markets for infrequent trading, while
the logistic map has been used to determine whether non-linearity exists in returns generating
process. Next we used several econometric models to test for market efficiency. The results of
runs test, variance ratio, serial correlation, BDS, and regression analysis indicate that we can
reject the hypothesis that lagged price information cannot predict future prices. In other words,
prices do not follow random walk properties; even after correction for thin trading.
We next analyze volatility structure using GARCH models. The results of GARCH
(1,1) model indicate that volatility clustering still seems to characterize some markets. While in
three markets (Egypt, Kuwait, and Palestine) volatility seems to be persistent. Moreover, the
results of EGARCH (1,1) model show that four markets (Bahrain, Dubai, Kuwait, and Oman)
exhibit signs of leverage effect and asymmetric shocks to volatility. Compared with other
emerging and international markets; Arab stock markets display relatively low rate of excessive
volatility as indicated by Schwert model. Furthermore, the dependence in the second moment
found to be quite enough to characterize the non-linear structure in the time series. Finally, we
find that seasonality and calendar effects exist in Arab markets with three forms; day-of-the-week
effect, month-of-the-year effect and the Halloween indicator. We conclude that Arab stock
markets under examination are not efficient in the week form sense of efficient market
hypothesis.
There is a large body of empirical evidence that financial markets become highly
integrated. According to modern portfolio theory, gains from international portfolio
diversification are related inversely to the correlation of equity returns. The results of multivariate
cointegration techniques, structural vector autoregression (SVAR) and vector autoregression
(VAR) models indicate that, there is no cointegrating relation between Arab and international
stock markets. The results of SVAR show that the linkage between international and Arab
markets is very weak. Next we investigate the dynamic relationships among Arab markets them
selves, and how do other factors; such as oil prices, affect the performance of these markets
especially for Gulf Cooperation Council (GCC) stock markets. To do that, Arab markets have
been divided into two sub-groups: oil production countries (GCC countries) and non-oil
production countries (Jordan, Egypt, and Palestine). The results indicate the existence of long-run
relation between markets, however, the short-run linkages still very weak. Non-oil countries’
markets can offer diversification benefits for rich GCC investors. Moreover, oil prices found to
have a significant effect on GCC markets and dominate the long-run equilibrium. Oil prices play
a significant role in affecting GCC markets’ volatility. While after the raise in oil prices;
especially during the last two years, linkages between oil prices and GCC markets increased. Four
GCC markets have predictive power on oil prices, with two markets to be predicted by oil prices.
We conclude that Arab stock markets can offer diversification potentials for regional and
international investors. Oil prices have a significant effect on GCC markets.
Finally, we suggest a strategic plan to improve these markets based on two main broad
goals, improving market efficiency and increasing market liberalization. To achieve these goals
we identify specific targets and strategies that could be realized through tactical programs and
activities.
| Identifer | oai:union.ndltd.org:upatras.gr/oai:nemertes:10889/1084 |
| Date | 24 November 2008 |
| Creators | Zarour, Bashar Abu |
| Contributors | Συριόπουλος, Κωνσταντίνος, Συριόπουλος, Κωνσταντίνος, Βραχάτης, Μιχαήλ, Μπότσαρης, Χαράλαμπος, Σύψας, Παναγιώτης, Αναστασόπουλος, Γεώργιος, Γεωργόπουλος, Αντώνιος, Μάρκελλος, Ραφαήλ |
| Source Sets | University of Patras |
| Language | gr |
| Detected Language | English |
| Type | Thesis |
| Rights | 0 |
| Relation | Η ΒΥΠ διαθέτει αντίτυπο της διατριβής σε έντυπη μορφή στο βιβλιοστάσιο διδακτορικών διατριβών που βρίσκεται στο ισόγειο του κτιρίου της. |
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