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Regime-Switching Behaviour in the Conditional Volatility of MENA Stock Market Returns

Author

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  • Slah Bahloul

    (Slah Bahloul (corresponding author), Associate Professor of Finance, University of Sfax, Tunisia, Higher School of Business Administration. Sfax Tunisia. E-mail: SlahBahloul@gmail.com)

  • Fathi Abid

    (Fathi Abid, Professor of Finance, University of Sfax, Tunisia, Faculty of Economics and Management Science, Sfax Tunisia. E-mail: Fathi.Abid@fsegs.rnu.tn)

Abstract

The objective of this article is to investigate the behaviour of the time-varying volatility in 11 Middle East and North African (MENA) countries’ stock market using a three-state Markov regime switching model over the period from 30 October 2006 to 21 October 2011. We find that MENA stock market volatility can be characterised by three regimes: tranquil period with low volatility of volatility, turmoil regime with high volatility of volatility and crisis regime with extremely high volatility of volatility. Besides, the Granger causation effects from the MSCI World index to MENA stock markets are stronger and statistically significant especially in crisis regime. JEL Classification: F30, G01, G15

Suggested Citation

  • Slah Bahloul & Fathi Abid, 2014. "Regime-Switching Behaviour in the Conditional Volatility of MENA Stock Market Returns," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 13(3), pages 253-278, December.
    • Handle: RePEc:sae:emffin:v:13:y:2014:i:3:p:253-278
    DOI: 10.1177/0972652714552042
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    References listed on IDEAS

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    Cited by:

    1. Jyothi Chittineni, 2018. "Indian Implied Volatility Index: A Macroeconomic Study," Applied Economics and Finance, Redfame publishing, vol. 5(5), pages 75-82, September.
    2. Jyothi Chittineni,, 2017. "Regime switching behavior of Indian VIX and its time dependent correlation with select developed economies," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(5), pages 666-675, December.

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    More about this item

    Keywords

    Time-varying volatility; MENA countries’ stock market; three-state Markov regime switching model; Granger causality test;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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