The Middle East financial markets have experienced several unexpected volatility shifts during the last two decades had recorded a serious impact on these markets and caused a financial turmoil that has elevated the uncertainties in the region. In view of this, more empirical findings should be learned and documented for future benefits. As one of the affected countries, Jordan was chosen as a case to provide empirical insight on the matter. This paper analyzed the behavior of Jordan's stock market (Amman Stock Exchange, ASE) during the intervals of high uncertainty. It highlighted the impact of volatility on this market in terms of its efficiency and returns, during 2004-2012 periods, by utilizing the iterated cumulative sums of squares (ICSS) algorithm, GARCH and GARCH-M models. Sudden changes in volatility seem to arise from the evolution of emerging stock markets, exchange rate policy changes and financial crises. Evidence also reveals that when sudden shifts are taken into account in the GARCH models, the persistence of volatility is reduced significantly in every series. Research results provided significant empirical evidence for positive risk-return relationship in the stock exchange. Moreover, this study also found that the stock market, across all sectors, was more sensitive to global news events as compared to ISSN 1941-899X 2015 www.macrothink.org/jmr 133 the local events. The asymmetrical responses to good and bad news were also an important characteristic of the ASE market behavior. Journal of Management Research
The purpose of this study is to test the validity of CAPM in Amman Stock Exchange (ASE) during the period (2010 – 2014), which was divided into three sub periods. We used monthly returns of 60 stocks of Jordanian companies listed in ASE. Black, Jensen and Scholes (1972) and Fama and MacBeth (1973) methods were used to test the CAPM in different study sub-periods. The analysis results showed that higher risk (beta) is not associated with higher levels of return, which violated the CAPM assumption. Results of the study leads to contradict the theory’s assumption that beta coefficient is a good toll to predict the relationship between risk and return; hence the beta coefficient of some portfolios in the three sub periods was not significant. In addition, the results of testing SML violated the CAPM assumption in the three sub periods that, the slope should be equal to the average risk premium. Finally, tests of nonlinearity of the relationship between return and betas validated the CAPM hypothesis, that the expected return-beta relationship is linear. Depending on the above results, we couldn’t find conclusive evidence in support of CAPM in ASE.
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