Global and regional integration of the Middle East and North African (MENA) stock markets

Jung-Suk Yu and M. Kabir Hassan

The Quarterly Review of Economics and Finance, 2008, vol. 48, issue 3, 482-504

Abstract: We investigate financial integration of MENA region to facilitate a more in-depth exploration of the structure of interdependence and transmission mechanism of stock returns and volatility between MENA and world stock markets. The EGARCH-M models with a generalized error distribution are employed to consider both leverage effect of negative shocks and leptokurtosis prevalent in the MENA stock markets. The estimation results of multivariate AR-GARCH models indicate that there are large and predominantly positive volatility spillovers and volatility persistence in conditional volatility between MENA and world stock markets. Own-volatility spillovers are generally higher than cross-volatility spillovers for all the markets.

Date: 2008
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