Exploring the Symbiotic Link: Co-Integration Analysis of the Egyptian Stock Exchange and International Equity Markets
The present study addresses the limited discussion on the equity market in the Middle East and North African region (MENA) concerning the spill-over effects from international equity markets. By employing time series techniques, we examine the integration and causality of interdependencies among five major stock exchange markets worldwide: USA, UK, Malaysia, Hong Kong, and Japan, along with their relationship with the Egypt Stock Exchange market. Spanning from March 1998 to January 2018, our study uniquely considers the interaction between developed and developing countries. Our co-integration findings reveal the limitations of international diversification for investors with long holding periods. We highlight the importance of seeking non-co-integrated markets, such as Malaysia and Hong Kong, which were found to be insignificant in this study, for investors aiming to diversify their portfolios and explore interesting long and short-term investment opportunities.
Keywords : Co-Integration Analysis; Egyptian Stock Exchange; International Equity Market; Symbiotic Link
- Abdullah, A. M., Wahab, H. A., Ghazali, M. F., Hasan, H., Ruslan, R. A. M., & WMNHWA, A. (2022). Portfolio Diversification Benefits of Malaysia's Stock Indices with Commodities: An Analysis Based on the MGARCH-DCC and Wavelet Techniques. Jurnal Pengurusan, 64, 131–147. http://myscholar.umk.edu.my/handle/123456789/3618
- Abid, I., Goutte, S., Guesmi, K., & Jamali, I. (2019). Transmission of shocks and contagion from US to MENA equity markets: The role of oil and gas markets. Energy Policy, 134, 110953. https://www.sciencedirect.com/science/article/abs/pii/S0301421519305403
- Al Nasser, O. M., & Hajilee, M. (2016). Integration of emerging stock markets with global stock markets. Research in International Business and Finance, 36, 1-12. https://www.sciencedirect.com/science/article/abs/pii/S0275531915300301
- Alaeddin, O., Abojeib, M., Azmi, W., Alchaar, M. O., & Salim, K. (2019). The Effectiveness of the Bank Lending Channel: The Role of Banks' Market Power and Business Model. Contemporary Economics, 13(3), 253-269. http://bazekon.icm.edu.pl/bazekon/element/bwmeta1.element.ekon-element-000171573282
- Ali, M., Alam, N., & Rizvi, S. A. R. (2020). Coronavirus (COVID-19)—An epidemic or pandemic for financial markets. Journal of Behavioral and Experimental Finance, 27, 100341. https://www.sciencedirect.com/science/article/pii/S2214635020301350
- Al-Kofahi, Z. G., Mahdavian, A., & Oloufa, A. (2022). System dynamics modeling approach to quantify change orders impact on labor productivity 1: principles and model development comparative study. International journal of construction management, 22(7), 1355-1366. https://www.tandfonline.com/doi/full/10.1080/15623599.2020.1711494
- Alkulaib, Y. A., Najand, M., & Mashayekh, A. (2009). Dynamic linkages among equity markets in the Middle East and North African countries. Journal of Multinational Financial Management, 19(1), 43-53. https://ideas.repec.org/a/eee/mulfin/v19y2009i1p43-53.html
- Bhuiyan, E. M., & Chowdhury, M. (2020). Macroeconomic variables and stock market indices: Asymmetric dynamics in the US and Canada. The Quarterly Review of Economics and Finance, 77, 62-74. https://www.sciencedirect.com/science/article/pii/S1062976919301917
- Cherif, M., & Gazdar, K. (2010). Institutional and macroeconomic determinants of stock market development in MENA region: New results from a panel data analysis. International Journal of Banking and Finance, 7(1), 139-159. https://scirp.org/reference/referencespapers.aspx?referenceid=2934521
- Darrat, A. F., Elkhal, K., & Hakim, S. R. (2000). On the integration of emerging stock markets in the Middle East. Journal of Economic Development, 25(2), 119-130. https://ideas.repec.org/a/jed/journl/v25y2000i2p119-129.html
- Dutta, A., Nikkinen, J., & Rothovius, T. (2017). Impact of oil price uncertainty on Middle East and African stock markets. Energy, 123, 189-197. https://ideas.repec.org/a/eee/energy/v123y2017icp189-197.html
- Joshi, N. A., & Joshi, M. (2021). Co-Integration and Causality Among Stock Market Indices: A Study of 35 Indices Across 5 Continents. SCMS Journal of Indian Management, 18(1), 131-153. https://www.scms.edu.in/uploads/journal/January-March-20211.pdf
- Kalu, E. U., Arize, A. C., Ilo, S. O., Ihegboro, I., & Eze, C. G. (2023). Evaluating the interactive effect of domestic and global stock market variables on the depth of the financial system in Sub-Saharan African countries: a panel ARDL approach. Journal of Economic Studies, 50(3), 601-624 https://econpapers.repec.org/article/emejespps/jes-05-2021-0230.htm
- Kamal, A. L. M. (2022). Interrelation Dynamics between Exchange Rate and Stock Market Returns in Egypt. Archives of Business Research, 10(9). https://journals.scholarpublishing.org/index.php/ABR/article/view/13134
- Kim, J., Yoon, S., & Kim, S. (2018). Dynamic stock market integration driven by the European Monetary Union: An empirical analysis. International Review of Financial Analysis, 29(10), 184-197. https://doi.org/10.1142/9789813223585_0010
- Lütkepohl, H. (2005). New introduction to multiple time series analysis. Springer Science & Business Media. https://link.springer.com/book/10.1007/978-3-540-27752-1
- Messaouda, B. (2021). Asymmetric Information Influence On Efficiency Of Capital Market-Case of Egypt Stock Exchange. North African Review of Economics and Management, 7(2), 1-17. https://www.asjp.cerist.dz/en/article/143065.
- Metawa, N., Hassan, M. K., Metawa, S., & Safa, M. F. (2019). Impact of behavioral factors on investors’ financial decisions: case of the Egyptian stock market. International Journal of Islamic and Middle Eastern Finance and Management, 12(1), 30-55. https://www.emerald.com/insight/content/doi/10.1108/IMEFM-12-2017-0333/full/html
- Ratanapakorn, O., & Sharma, S. C. (2002). Interrelationships among regional stock indices. Review of Financial Economics, 11(2), 91-108. https://www.sciencedirect.com/science/article/pii/S105905600200103X
- Rehman, M. U., Ahmad, N., Shahzad, S. J. H., & Vo, X. V. (2022). Dependence dynamics of stock markets during COVID-19. Emerging Markets Review, 51, 100894. https://ideas.repec.org/a/eee/ememar/v51y2022ipbs1566014122000115.html
- Shawtari, F. A., Salem, M. A., Hussain, H. I., & Hawariyuni, W. (2016). Long run relationship between macroeconomic indicators and stock price: The case of South Africa. JIBC Publisher. https://ir.unikl.edu.my/jspui/handle/123456789/14823
- Singhal, S., Choudhary, S., & Biswal, P. C. (2019). Return and volatility linkages among International crude oil price, gold price, exchange rate and stock markets: Evidence from Mexico. Resources Policy, 60, 255-261. https://www.sciencedirect.com/science/article/pii/S0301420718305300
- Stoupos, N., & Kiohos, A. (2022). Euro area stock markets integration: Empirical evidence after the end of 2010 debt crisis. Finance Research Letters, 46, 102423. https://www.sciencedirect.com/science/article/pii/S1544612321004128
- Umar, Z., Polat, O., Choi, S. Y., & Teplova, T. (2022). The impact of the Russia-Ukraine conflict on the connectedness of financial markets. Finance Research Letters, 48, 102976. https://doi.org/10.1016/j.frl.2022.102976
- Youssef, M., Mokni, K. & Ajmi, A.N. (2021). Dynamic connectedness between stock markets in the presence of the COVID-19 pandemic: does economic policy uncertainty matter?. Financial Innovation, 7, 13. https://doi.org/10.1186/s40854-021-00227-3
- Yunvirusaba, N., Aduda, J., & Kube, A. (2019). Volatility spillover effects among securities exchanges in East Africa. International Journal of Economics and Finance, 11(10), 32-41. https://t.ly/XsQ5
- Yussuf, Y. C. (2022). Cointegration test for the long-run economic relationships of East Africa community: evidence from a meta-analysis. Asian Journal of Economics and Banking, 6(3), 314-336. https://www.emerald.com/insight/content/doi/10.1108/AJEB-03-2021-0032/full/html