Monitoring the Systematic and Unsystematic Risk in Dubai General Index

Tarek Ibrahim Eldomiaty, Sahar Charara and Wael Mostafa
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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

Journal of Emerging Market Finance, 2011, vol. 10, issue 3, 285-310

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.

Keywords: JEL Classification: P34; JEL Classification: G30; Systematic risk; unsystematic risk; discriminant analysis; DFM general index (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:10:y:2011:i:3:p:285-310

DOI: 10.1177/097265271101000302

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