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Title:	Sectoral stock market linkages and volatility transmissions in selected MENA countries
Authors:	Makwan Jamil Mustafa (P58126)
Supervisor:	Mohd. Azlan Shah Zaidi, Ass. Prof. Dr.
Keywords:	Universiti Kebangsaan Malaysia -- Dissertations Dissertations Academic -- Malaysia Economic development -- Middle East Economic development -- Africa North Africa North -- Economic conditions Middle East -- Economic conditions
Issue Date:	29-May-2013
Description:	Over the past years, stock market investment in emerging markets has been one of the crucial strategies in portfolio diversification of many investors. Middle East and North Africa (MENA) region, in particular, has been one of the potential markets. Though engulfed by both political and economic crises around the region, MENA is expected to maintain its stable growth and become profitable region for investors. To invest in MENA stock markets profitably, one has to know the behaviour of the stock markets prices, returns and their associated risks. Past studies have mainly looked at volatility transmissions of composite indices among MENA countries. However, studies on stock market return linkages and volatility transmissions among different sectors especially during crises and recovery periods are still limited. The main purpose of investing in different sectors is to benefit from increasing returns and declining risks. Previous studies have hardly investigated whether there are sectoral return linkages and volatility transmissions especially in MENA countries focusing on different periods. The main purpose of this study is to investigate risk-return relationships among different sectors of sock markets in MENA countries. In doing so, this study follows two objectives to examine long- and short-run linkages, and volatility transmissions. To achieve the objectives, two econometric techniques are used. First, the multivariate cointegration approach proposed by Johansen (1988) is employed in investigating long run co movement among the sectoral stock markets, while Vector Error Correction Model (VECM) is utilized to measure causality directions in the short-run among the sub-sectors indices of each country. Second, the multivariate GARCH (MGARCH) model proposed by Bollerslev et al. (1988) is used to evaluate the volatility relationship among different sectoral markets of each country. This thesis fills the gap by examining the linkages as well as the volatility transmissions among sectoral stock markets in three fast growing MENA countries, namely Saudi Arabia, Egypt, and Turkey. The data set is weekly frequency spanning from 23 April 2007- 28 February 2012. In order to take into account the effect of global financial crisis (sub-prime crisis), the sample has been split into two sub periods that are the crisis period as well as the recovery period. The results of the study reveal that at least a long-run relationship between sectoral markets as well as with composite index exists in all and sub sample periods. In the meanwhile, some sectors have different short-run relationships with each other and also with composite index in different country and different sample periods. With regard to MGARCH, the results unveil that the transmission of volatility among the sectoral markets differs in each country and each sample period. The overall results imply that investment in different sectors can hardly be an efficient strategy to diversify portfolio since a shock in one sector can destabilize other sectors and trigger a systemic crisis. The findings show that stock markets of MENA countries are in the long-run equilibrium. Different sectors provide an investment opportunity to diversify portfolios during normal periods. However, the findings draw the attention to the existing volatility transmission particularly during crises. Therefore, policymakers, regulators, and managers need to take into account this possible channel of risk and return to prevent contagious effects of a crisis. For example, portfolios comprised of different sectors benefit managers during normal periods; however, they expose managers to the volatilities of different sectors. Policy makers and regulators have crucial roles in regulating stock markets to manage the risk of volatility transmission and provide better diversification benefits,Certification of Master's/Doctoral Thesis" is not available
Pages:	147
Call Number:	HC415.15.M847 2013 tesis
Publisher:	UKM, Bangi
Appears in Collections:	Faculty of Economy and Management / Fakulti Ekonomi dan Pengurusan

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