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Monitoring the Systematic and Unsystematic Risk in Dubai General Index

Author

Listed:
  • Tarek Ibrahim Eldomiaty

    (British University in Egypt, Faculty of Business Administration, Economics and Political Science, PO Box: 43, Postal Code 11837, Cairo, Egypt. E-mail: tarek.eldomiaty@bue.edu.eg)

  • Sahar Charara

    (Banking Department, College of Business Administration, PO Box: 14143, Dubai, United Arab Emirates. E-mail: sahar_charara@hotmail.com)

  • Wael Mostafa

    (Misr International University, Faculty of Business Administration & International Trade, PO Box: 1–Heliopolis 11341, Cairo, Egypt. E-mail: waelmostafa1978@yahoo.com)

Abstract

Since stocks’ systematic and unsystematic risks are considered the basic requirements to form an investment risk profile, this article develops a discriminant model to monitor the systematic and unsystematic risk in the Dubai Financial Market (DFM) general index. Three sectors are addressed: banks, insurance firms and non-financial firms. In addition, a discriminant model is developed for the whole index. The results show that (a) the financial factors that affect systematic risk are profitability, liquidity, dividend policy and operating income, (b) the financial factors that affect unsystematic risk are operating income, dividend policy and liabilities. In general, the four discriminant models are characterised by high discriminatory power that ranges between 80 per cent and 90 per cent. This shows that the four discriminant models with their funda-mental financial contents can be fairly used for monitoring systematic and unsystematic risk in the DFM general index. Therefore, the answer is ‘yes’ to the question posed in the title of the article.

Suggested Citation

  • Tarek Ibrahim Eldomiaty & Sahar Charara & Wael Mostafa, 2011. "Monitoring the Systematic and Unsystematic Risk in Dubai General Index," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 10(3), pages 285-310, December.
    • Handle: RePEc:sae:emffin:v:10:y:2011:i:3:p:285-310
    DOI: 10.1177/097265271101000302
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    References listed on IDEAS

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    More about this item

    Keywords

    JEL Classification: P34; JEL Classification: G30; Systematic risk; unsystematic risk; discriminant analysis; DFM general index;
    All these keywords.

    JEL classification:

    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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