The relative influence of the East and the West on Middle Eastern emerging stock markets: an empirical investigation

Abstract

This article examines the relative influence of the US, UK and Japan on Middle Eastern Emerging Markets (MEEMs). The empirical results, from maximum likelihood regressions, Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models and Vector Autoregression (VAR) estimates, provide some support for a generally mild influence of the US, UK and Japan on the MEEMs, with the greatest influence coming from the US market and the least from Japan. The dynamics of the MEEMs are shown to be dominated primarily by their own price innovations. The findings further indicate that, although national responses to external shocks are generally heterogeneous, there are some similarities in the reactions to US, UK and Japanese market innovations, depending on the level of maturity of the stock markets in the MEEMs.