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On the Dynamic Transmission of Mean and Volatility across the Arab Stock Markets

Author

Listed:
  • Elie Bouri

    (Elie Bouri, Assistant Professor, USEK School of Business, Holy Spirit University of Kaslik, Lebanon. E-mail: eliebouri@usek.edu.lb)

  • Georges Azzi

    (Georges Azzi, Associate Professor, USEK School of Business, Holy Spirit University of Kaslik, Lebanon. E-mail: georgesazzi@usek.edu.lb)

Abstract

This article applies a multivariate model to uncover the dynamic mean and volatility interdependence across the markets of Morocco, Tunisia, Egypt, Lebanon, Jordan, Kuwait, Bahrain, Qatar, United Arabic Emirates (UAE), Saudi Arabia and Oman from June 2005 to January 2012. Results show that the Arab Middle East and North African equity markets are interconnected by their volatilities and not by their returns, which makes risk reduction possible. Volatility persistence and innovations in one market enclose figures that are valuable to investors and risk managers seeking to predict volatility in other markets. Surprisingly, we find evidence of significant volatility spillover from small to larger markets. JEL Classification: G1, G15, G17, C22, C32

Suggested Citation

  • Elie Bouri & Georges Azzi, 2014. "On the Dynamic Transmission of Mean and Volatility across the Arab Stock Markets," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 13(3), pages 279-304, December.
    • Handle: RePEc:sae:emffin:v:13:y:2014:i:3:p:279-304
    DOI: 10.1177/0972652714552041
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    References listed on IDEAS

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    Cited by:

    1. Bouri, Elie, 2015. "A broadened causality in variance approach to assess the risk dynamics between crude oil prices and the Jordanian stock market," Energy Policy, Elsevier, vol. 85(C), pages 271-279.
    2. Mnasri, Ayman & Nechi, Salem, 2016. "Impact of terrorist attacks on stock market volatility in emerging markets," Emerging Markets Review, Elsevier, vol. 28(C), pages 184-202.

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    More about this item

    Keywords

    Equity returns; MENA; multivariate GARCH; mean spillover; volatility spillover; conditional correlations;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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