The regional pricing of risk: An empirical investigation of the MENA equity determinants

Khaled Guesmi (1) , Sandrine Kablan (2) , Aymen Belgacem (3)

1 EconomiX - EconomiX
2 ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique
3 LEO - Laboratoire d'économie d'Orleans [2008-2011]

Using a sample of five-MENA emerging countries (Egypt, Tunisia, Morocco, Jordan, and Turkey) during the period 1996-2013, this study highlights the main factors that might influence regional integration of stock markets. We propose an advantageous econometric approach based on a conditional version of the International Capital Asset Pricing Model (ICAPM) to explore major sources of time-varying risks. We specifically apply the multivariate BEKK-GARCH process to simultaneously estimate the ICAPM for each country. The study puts in evidence that inflation, volatility of exchange rates, yield spread, current account deficit, dividend yield and economic growth are among the key determinants of regional integration in the MENA context whatever is the measure of exchange rate risk.

Mots clés: Multivariate GARCH; regional integration; ICAPM; MENA JEL Classification: F36; C32; G12

Domaines: Econométrie de la finance [q-fin.ST]

Khaled Guesmi, Sandrine Kablan, Aymen Belgacem. The regional pricing of risk: An empirical investigation of the MENA equity determinants. 2017. ⟨hal-01527654⟩