erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Comman Stochastic Trends in Emerging Stock Markets: The Case of Middle East Region

Lokman Gündüz (Yeditepe University)
Mohammed Omran (Arab Academy for Science and Technology, Egypt andUniversity of Plymouth, UK)

Abstract

Since emerging markets generally offer better economic performance and higher earning growth than do industrial capital markets, great attention has been taken to invest in these markets. Essentially, most empirical studies concentrated on testing the benefits from portfolio diversification with application on Latin American and Asia markets. Yet, emerging stock markets in the Middle East region did not witness comprehensive research in this context. Using multivariate test for cointegration and the vector error correction model, this paper empirically investigates into the common stochastic trends in Middle East stock markets. Precisely, the paper will consider whether price indices of five Middle East markets, namely: Morocco, Tunisia, Egypt, Jordan, Israel and Turkey display a common long-run behavior. In addition we also consider the cointegration analysis between these emerging markets in the Middle East region and those in developed markets to see whether there are any benefits from the portfolio diversification and to analyze whether the major stocks markets in the world such as New York, Nikkei and London dominate these countries.

Economic Research Center
Middle East Technical University
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e-mail: metuerc@metu.edu.tr