Middle East Stock Research Articles

Decisions regarding the role of bad news and asymmetric effects in the Middle East stock markets

This paper aims to study the impact of the COVID-19 pandemic, the Russian invasion of Ukraine, and the Turkey-Syria earthquake on the Middle East’s developed, emerging, and frontier markets. For this purpose, panel data of nine Middle East financial markets listed in Morgan Stanley from January 2, 2018, to July 27, 2023, were analyzed using multi criteria. In the event study, two approaches were deducted to analyze the price impact: 1) a standard event study and 2) an independent sample, following Brown and Warner (1985). The generalized autoregressive conditional heteroskedasticity (GARCH) group captures asymmetric and leverage effects. The results show volatility in financial market index returns and the impact of bad news and leverage in all markets. However, this effect is asymmetric across markets, indicating a low integration. Moreover, the negative impact of COVID-19 was more pronounced than that of both the Russian invasion of Ukraine and the Turkey-Syria earthquake. This study’s findings can help investors make informed investment decisions and select optimal portfolios. It will also add to the existing body of knowledge by shedding new light on the factors that influence stock price volatility and risk management in Middle Eastern international fiscal issues.

The Relationship between Changes in Corporate Governance Characteristics and Intellectual Capital

The primary goal of this study was to investigate the effects of changes in corporate governance elements on a company’s valuable resources (such as intellectual capital and its components). Previous studies have examined the impacts of some corporate governance characteristics on intellectual capital performance as a whole and they have produced inconclusive and different results. This paper examines the effects of some corporate governance characteristics (i.e., the change in CEO, the evolution of auditor, the change in board independence, and the change in institutional ownership) on intellectual capital and its components (i.e., capital employed, human capital, and structural capital). This research is based on a quantitative study and the selected sample contains 1170 observations from 220 companies listed on the Middle East Stock Exchange from 2011 to 2018. The research findings show a positive and significant relationship between an increase in institutional ownership and intellectual capital and its two components (human capital and structural capital). The results support the relationship between a change in auditor and intellectual capital and human capital efficiency. Further, a positive and significant association was found between an increase in board independence and human capital. However, no relationship was found between a change of CEO and intellectual capital or any of its components. This study extends the research field of corporate governance by studying the effects of changes in corporate governance characteristics on intellectual capital for the first time. Given the significant role of intellectual capital in the performance of firms, this study provides essential information to organisations’ decision makers.

Dynamic Connectedness between Global Commodity (Fuel and Non-fuel) Prices and Middle East Stock Market: Stock Exchange Perspective

Dynamic Connectedness between Global Commodity (Fuel and Non-fuel) Prices and Middle East Stock Market: Stock Exchange Perspective

Portfolio diversification with cryptocurrencies – Evidence from Middle Eastern stock markets

ABSTRACT The appealing features of cryptocurrency in the digital money sector have put them into the category of investable assets. Investment professionals have begun to consider their investability and diversification benefits. It is vital for investors to understand the return-risk behaviour among investable assets to reap the benefits of diversification. This paper considers a proxy of cryptos, specifically Bitcoin, Litecoin, Ethereum, Ripple & Neo, and the Middle East stock market indices, to examine the dynamic relationship among them using the vector error correction model. This study found evidence to suggest that cryptos exhibit a co-integrated relationship while there is no evidence of significant cointegrated movements occurring between the cryptos and the market indices. The latter finding implies that cryptos are decoupled from the market indices and can serve as a diversification option for investors. The mean-variance approach confirms that cryptocurrencies fit into an optimal portfolio and involve an enhanced return-risk reward for investors.

Providing a Network for Measuring the Dynamics Volatility Connectedness of Oil and Financial Markets

Various studies have shown that markets are not separated and that fluctuations in different markets affect each other. Therefore, awareness of connectedness is needed for investors and policymakers for making appropriate decisions. The aim of this paper is to measure the dynamics connectedness of selected stock markets in the Middle East, oil markets, gold, the dollar index, and euro-dollar and pound-dollar exchange rates during the period February 2007 to August 2019 in networks with different weekly horizons. In this paper, we intend to evaluate the pairwise impact of crude oil and the Middle East stock markets, in particular on the Tehran Stock Exchange, and to analyze this variance using different time horizons. The results show that in all time horizons the variance of forecast error in most markets is due to the shocks themselves. The Saudi Arabian Stock Exchange has the most impact on other Middle Eastern stocks. The dynamics connectedness of the oil markets is remarkable, however, as the time horizon increases, dynamic connectedness between the two markets decreases and they are mostly affected by other markets, especially the Middle East stock exchanges except for Iran. Moreover, Iran stock market is an isolated market. About the gold market, there is a significant connectedness with the pound-dollar exchange rate and gold market; however, the dynamics connectedness of this market with other markets are not significant. Therefore, this market and Iran stock exchange can be used as a tool to hedge risk for investors.

Linking crude oil prices and Middle East stock markets

AbstractThis study investigates the effects of oil prices (OPs) on stock markets in the Middle Eastern (ME) economies. The focus is on the dynamic relationship between crude OPs and stock market capitalisation (MC) in the ME. We use daily data from nine countries between the years 2001 and 2015 to examine the relationships based on Vector Autoregression (VAR), Vector Error Correction Model (VECM) and Impulse Response Function (IRF). VECM results indicate that there are long‐run linkages between OP and MC in seven ME economies from 2001 to 2015, three countries in the pre‐shale (2001–2008) and four countries in the post‐shale (2009–2015) periods. The VAR models show short‐run causality running from OP to MC in two countries from 2001 to 2015, five countries in pre‐shale and six countries in post‐shale periods. The IRFs verify the relationships between OPs and stock market value for most of the ME markets.

Volatility Estimation and Forecasting of EGX30

One of the significant features of financial data that has won much attention is the volatility; because it is a numerical measure of the risk faced by individual investors and financial institutions. It is well known that the volatility of financial data often varies over time and tends to cluster in periods, i.e., high volatility is usually followed by high volatility, and low volatility by low volatility. The QML estimation procedure is illustrated with using daily return data for one stock in the Middle East Stock Exchange. The effects of outliers on modeling and forecasting the conditional variances in return series are also studied with this series.

Short-Term Momentum Effect: a Case of Middle East Stock Markets

The objective of this paper is to find short-term momentum effect in stock markets of the Middle East and to examine whether short-term momentum profits can be explained by risk-based CAPM model. Seven major stock markets from the Middle East were selected. Short-term momentum effect was found in all seven stock markets and CAPM does not adequately explain the short-term momentum profits but momentum portfolio returns are statistically significant. This paper is first attempt to bring major stock markets of the Middle East together and examine them for the short term momentum effect phenomenon. Future research should include more stock markets in order to have a better understanding of Middle Eastern stock markets.

Integration In Middle East Stock Markets: Determinants, Effects And Evolutions

This article investigates the stock market integration within the Middle East region. We develop a regional dynamic version of the CAPM and estimate it using a multivariate GARCH methodology. We contribute to the financial literature by proposing the first empirical work that addresses the following three questions for emerging stock markets from Middle East region: (i) What factors determine Middle East regional stock market integration? (ii) Is exchange rate risk priced in Middle East emerging stock markets? And (iii) what are the relative contributions of regional and local risk factors to the total risk premium in Middle East emerging stock markets?

The Role of Energy Commodities in Middle East Stock Market Integration

Given the importance of stock market integration as an indicator of portfolio benefits on the merits of global fund diversification, we test whether the integration of frontier stock market in Middle East (Jordan, Kuwait, Lebanon, and Oman) can be justified by the movement of energy commodities prices. Using the International capital asset pricing model (ICAPM) in the period January 1997–March 2010, our results indicate that there is a dynamic relationship between energy commodities in the long run. However, the sort linkages of Granger causalities show that only coal and oil Granger-cause market integration. As robustness check, this study investigates the integration of those markets into the European, Australasia, and Far East (EAFE), US, and UK stock markets. Using multivariate regression and after controlling for the size and trading liquidity, we found that there is significant relationship between energy commodities and market integration.

Dynamic relationships between Middle East stock markets

PurposeThe aim of this paper is to examine the dynamic relationships between Middle East stock markets.Design/methodology/approachDaily data from the Egyptian (CMA) and Israeli Tel Aviv Stock Exchange (TASE‐100) stock indices are considered. The paper employs a Bivariate cointegration GARCH(1,1) model to explain price discovery and lead‐lag relationships for the period July 1997 – August 2007.FindingsEmpirical results confirm that the Egyptian market plays a price discovery role, implying that CMA prices contain useful information about TASE‐100 prices. CMA market is more informationally efficient than TASE‐100 market. Further, CMA index reflects new information faster than TASE‐100 index.Research limitations/implicationsFuture research should examine the dynamic relationships between Middle East stock markets using intraday (high frequency) data and recent dynamic (long memory) methods.Practical implicationsThe findings are helpful to financial managers and traders dealing with Middle East stock markets.Originality/valueThe contribution of this paper is to provide evidence on the stock market dynamics and financial linkages between two Middle East emerging markets using recent daily data and a modern econometric model. To the best of the author's knowledge, no previous study has tested the dynamic relationships between daily prices of CMA and TASE‐100.

Transitory and Permanent Volatility Components: The Case of the Middle East Stock Markets

Recent research has suggested that returns volatility may contain both short-run and long-run components due to the existence of heterogeneous information flows or heterogeneous agents (Andersen and Bollerslev 1997a, 1997b; Müller et al., 1997). This paper investigates the existence of such volatility decomposition in daily index returns data for nine emerging markets in the Middle East region using the permanent-transitory component variance model of Engle and Lee (1993). The existence of a component structure to volatility is supported by the existence of a transitory component to volatility and a permanent volatility that decays over a much longer horizon in three markets in the Middle East, namely Jordan, Oman, and Saudi Arabia. The component model was able to capture all structure within the data for Saudi Arabia on the basis of residual tests. However, some structure in the residuals remains in the Oman and Jordan markets.