Testing for -contagion- of the subprime crisis on the Middle East and North African stock markets : A Markov Switching EGARCH approachReport as inadecuate




Testing for -contagion- of the subprime crisis on the Middle East and North African stock markets : A Markov Switching EGARCH approach - Download this document for free, or read online. Document in PDF available to download.

1 Ecole Supérieure des Sciences Economiques et Commerciales de Tunis 2 GATE Lyon Saint-Étienne - Groupe d-analyse et de théorie économique

Abstract : In this paper, we investigate whether the recent financial turmoil which arose in the United States has contaminated the Middle East and North African countries MENA. In contrast to Lagoard-Segot and Lucey 2009, we try to identify the existence of pure contagion Masson, 1999 rather than shift-contagion Rigobon, 2003. Then, we explicitly define financial -contagion- in accordance with Eichengreen et al. 1996 and we extend the Cerra and Saxena 2002 methodology by using a Markov-Switching EGARCH model introduced by Henry 2009 in order to identify contaminated MENA stock markets. Our results provide evidence of a persistence of recession characterised by low mean-high variance regimes which coincides with the third phases of the subprime crisis. In addition, there is evidence of mean and volatility contagion in MENA stock markets caused by the US stock market.

Keywords : subprime crisis Contagion MENA stock markets Markov switching EGARCH model





Author: Wajih Khallouli - René Sandretto -

Source: https://hal.archives-ouvertes.fr/



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