Does the entry of foreign investors influence the volatility of Doha Securities Market?

Ghassan, Hassan and Abdullah, Abdelgader (2009): Does the entry of foreign investors influence the volatility of Doha Securities Market? Published in: International Journal of Monetary Economics and Finance , Vol. 3, No. 4 (2010): pp. 359-373.

Abstract

The paper analyzes the time variation in volatility in Doha Securities Market and examines the presence of structural changes in GARCH-based conditional volatility during the period 2002-2008. This issue is related to the market liberalization reforms permitting foreign investors to enter the equity market in 2005.The analysis reveals that there is a high risk in return equation. It also indicates that the return is positively and more significantly related to the risk. The GARCH-Mean model shows that the volume term has a more significant parameter in both return and risk equations, and that the information flow provided to the market comes from the risk and return variables. There is a high persistence of the shocks in the volatility, but it was less in the first sub-period compared to its persistence after the entry of foreign investors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Doha Securities Market, EGARCH, Qatar, Return, Volatility
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

References

Bekaert, G., C.R. Harvey and C. Lundblad (2006) “Growth Volatility and Financial Liberalization”, Journal of International Money and Finance 25, 370-403.

Bekaert, G. and C.R. Harvey (2000) “Foreign Speculators and Emerging Equity Markets”, Journal of Finance 55, 565-613.

Bekaert, G. and C.R. Harvey (2002) “Research in Emerging Markets Finance: Looking to the Future”, Emerging Markets Review 3, 429-448.

Bollerslev T. and J.M. Woolridge (1992) ‘’Quasi maximum likelihood estimation and inference in dynamic models with varying covariances’’, Econometric Reviews 11, 143-172.

Bollerslev, T. (1986) “Generalized Autoregressive Conditional Heteroscedasticity’’, Journal of Econometrics 31, 307–327.

Chari, A. and P. Henry (2004) “Risk Sharing and Asset Prices: Evidence from A Natural Experiment”, Journal of Finance 59, 1295-1324.

Cunado J., J.G. Bscarri and F.P. De Gracia (2006) “Changes in Dynamic Behavior of Emerging Market Volatility: Revisiting the Effects of Financial Liberalization”, Emerging Markets Review 7, 261-278.

Duan J.C. (1997) ‘’Augmented GARCH (p, q) Process and Its Diffusion Limit’’, Journal of Econometrics 79, 97-127.

Durnev, A., Morck, R. and B.Yeung (2004) “Value-Enhancing Capital Budgeting and Firm-Specific Stock Return Variation’’, Journal of Finance 59, 65-105.

Elliot, G., Rothenberg, T. and J. Stock (1996) “Efficient tests for an autoregressive unit root”, Econometrica 64, 813–836.

Engle R.F. and V.K. Ng (1993) ‘’Measuring and testing the impact of news on volatility’’, Journal of Finance 48, 1749-1778.

Engle R.F. and D.M. Lilien and R.P. Robins (1987) ‘’Estimating time varying risk premium in the term structure: the ARCH-M model’’, Econometrica 55, 391-407.

Floros Ch. (2008) ‘’Modeling Volatility using GARCH Models: Evidence from Egypt and Israel’’, Middle Eastern Finance and Economics 2, 31-41.

Harris, D., B. McCabe and S. Leybourne (2003) ‘’Some limit theory for autocovariances whose order depends on sample size’’, Econometric Theory 19, 829-864.

Hayashi, F. (2000) ‘’Econometrics’’, Princeton University Press. ISBN: 978-1-4008-2383-3.

Jayasuriya, S (2005) “Stock Market Liberalization and Volatility in the Presence of Favorable Market Characteristics and Institutions”, Emerging Markets Review 6, 171-191.

Joshi, P. and Pandya, K. (2008) “Exploring Movements of Stock Price Volatility in India”, The Icfai Journal of Applied Finance, Vol. 14(3), 5-32.

Kawakatsu, H. and M.R. Morey (1999) “Financial Liberalization and Stock Market Efficiency: An Empirical Examination of Nine Emerging Market Countries”, Journal of Multinational Financial Management 9, 353-371.

Levine,R and S. Zervos (1998) “Capital Market Liberalization and Stock Market Development”, World Development 26, 1169-1183.

Miles,W. (2002) “Financial Deregulation and Volatility in Emerging Equity Markets”, Journal of Economic Development 27, 113-126.

Ng, S. and P. Perron (2001) “Lag length selection and the construction of unit root tests with good size and power’’, Econometrica 69, 1519–1554.

Stiglitz ,J.E. (2000) “Capital Market Liberalization, Economic Growth, and Instability”, World Development 28, 1075-1086.