Abstract
The study investigates if emerging and frontier equity markets of Middle East and North Africa (MENA) region are well integrated with each other and with the developed markets of USA and UK. Gregory and Hansen cointegration test and Geweke Measures of Feedback are employed to analyze long-run relationship and short-run dependencies between equity markets respectively. The results show that emerging markets of Egypt and Saudi Arabia are fairly segmented with the developed markets and hence have the potential to enhance diversification benefits of a global portfolio. Further, frontier markets like Bahrain, Jordan and Morocco are not well integrated with both the developed markets and regional emerging markets. Hence, these frontier markets also offer gains of diversification to international investors. Results of this study will facilitate international investors in designing an optimal portfolio. It will also benefit policymakers in formulating suitable economic stabilization policies.
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Notes
- 1.
Weekly stock price information of Bahrain is available from 2003 onwards
- 2.
The results of the three Geweke Measures of Feedback between DM-EM, DM-FM and EM-FM are available on request.
- 3.
Figure 14.1 presents only Geweke Measures of Instantaneous Feedback as only this feedback measures is found to be statistically significant for all the three pairs of markets.
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Thomas, N.M., Kashiramka, S., Yadav, S.S. (2018). Do Emerging and Frontier Stock Markets of Middle East and North Africa (MENA) Region Provide Diversification Opportunities?. In: Tsounis, N., Vlachvei, A. (eds) Advances in Time Series Data Methods in Applied Economic Research. ICOAE 2018. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-02194-8_14
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