Comovements and causality of sector price indices: evidence from the Egyptian Stock Exchange

Walid M.A. Ahmed

International Journal of Business and Emerging Markets, 2012, vol. 4, issue 3, 200-222

Abstract: Contributing to the meagre published literature on interrelationships amongst stock market sectors of an economy, the present study sets out to examine both the long-run and short-run aspects of intersectoral linkages in the Egyptian stock market. The multivariate cointegration analysis reports evidence in support of the existence of only a single cointegrating vector within the sectoral indices. Moreover, the results of Granger's causality analysis show that the short-run causal relationships between the sectoral indices are considerably limited and, where they exist, virtually unidirectional. In general, these results lead to the conclusion that there is still room to derive benefits from portfolio diversification in the short run. However, investors with long-term horizons may not benefit from diversifying investments into the different sectors of the Egyptian stock market.

Keywords: intersectoral linkages; emerging markets; EGX; Egyptian stock exchange; Johansen; cointegration analysis; Granger; causality analysis; stock markets; sector price indices; portfolio diversification. (search for similar items in EconPapers)
Date: 2012
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