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Dynamic relationships between Middle East stock markets

Christos Floros (Department of Economics, Portsmouth Business School, University of Portsmouth, Portsmouth, UK Department of Finance and Insurance, TEI of Crete, Crete, Greece)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 30 August 2011

Abstract

Purpose

The aim of this paper is to examine the dynamic relationships between Middle East stock markets.

Design/methodology/approach

Daily data from the Egyptian (CMA) and Israeli Tel Aviv Stock Exchange (TASE‐100) stock indices are considered. The paper employs a Bivariate cointegration GARCH(1,1) model to explain price discovery and lead‐lag relationships for the period July 1997 – August 2007.

Findings

Empirical results confirm that the Egyptian market plays a price discovery role, implying that CMA prices contain useful information about TASE‐100 prices. CMA market is more informationally efficient than TASE‐100 market. Further, CMA index reflects new information faster than TASE‐100 index.

Research limitations/implications

Future research should examine the dynamic relationships between Middle East stock markets using intraday (high frequency) data and recent dynamic (long memory) methods.

Practical implications

The findings are helpful to financial managers and traders dealing with Middle East stock markets.

Originality/value

The contribution of this paper is to provide evidence on the stock market dynamics and financial linkages between two Middle East emerging markets using recent daily data and a modern econometric model. To the best of the author's knowledge, no previous study has tested the dynamic relationships between daily prices of CMA and TASE‐100.

Keywords

Citation

Floros, C. (2011), "Dynamic relationships between Middle East stock markets", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 4 No. 3, pp. 227-236. https://doi.org/10.1108/17538391111166467

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited