Tunisian revolution and stock market volatility: evidence from FIEGARCH model

Abstract

Purpose – Previously elaborated research works, dealing with the political uncertainty effect on stock market, have been primarily concerned with such political events as terrorist attacks, elections, wars, natural catastrophes and financial crashes. Such little research has been concerned with civil uprisings and revolutionary movements, as crucial sources of political uncertainty. The purpose of this paper is to study the impact of political uncertainty (resulting from the Tunisian Revolution) on the volatility of major sectorial stock indices in the Tunisian Stock Exchange (TSE). Design/methodology/approach – The authors apply the fractionally integrated exponential generalized autoregressive conditional heteroscedasticity model (FIEGARCH), which helps maintain a direct shock-persistence as well as a shock asymmetric volatility measurement. This model is applied to the daily returns relevant to nine sectorial stock indices and to the Tunisian benchmark index (TUNINDEX) with respect to three sub-periods (before, during and follows the Tunisian Revolution). Findings – The reached findings suggest that the shock impact throughout the Revolution period on construction, industries, consumer services, financial services, financial companies indices’ sectorial and the TUNINDEX return volatilities have proven to be permanent, while its persistence on the other indices has been discovered to be transitory. In addition, the achieved results appear to reveal a low leverage effect on all indices. This result seems to be very important since the Tunisian Revolution turns out to have a very important effect on the TSE. Originality/value – The paper’s empirical contribution lies in using the FIEGARCH approach to model the Tunisian sectorial indices’ volatility dynamics, persistence degree and leverage effect. This contribution goes a long way in helping regulators and international investors to further recognize the extent to which political instability does participate in affecting the TSE.

Stock Market Reaction to Terrorist Attacks and Political Uncertainty: Empirical Evidence From the Tunisian Stock Exchange

“…In sum, there is no doubt that Arab Spring revolution in Tunisia, Egypt, Libya, Yemen and Syria affect macroeconomic variables and stock markets in the national economy and our results confirm those of Suleman (2012), Essaddam and Mnasri (2015), Mnasri and Nechi (2016) and Jeribi et al(2016) who show that terrorist attacks have a positive and significant impact on financial market volatility.…”

“…Little research has been done on the impact of political uncertainty stemming from civil uprisings (eg the Tunisian revolution) on the stability and characteristics of stock market cycles. So, Jeribi et al (2016) study the impact of political uncertainty (resulting from the Tunisian revolution) on the volatility of the main sector in stock market indices of the Tunisian Stock Exchange. The authors apply the fractionally integrated exponential generalized autoregressive conditional heteroscedasticity model (FIEGARCH).…”

The Impact of Oil Prices on Stocks Markets: New Evidence During and After the Arab Spring in Gulf Cooperation Council Economies

“…Moreover, the author revealed that the impact of bad news on stock markets volatility is higher than that of the impact of good news. The same results of negative influences of Arab Spring had been observed by Mnif (2017) and Jeribi et al (2015) in Tunisian stock markets.…”

The Impact Of Political Instability Driven By The Tunisian Revolution On Stock Market Volatility: Evidence From Sectorial Indices

“…The activities of the Tunis stock exchange were hardly affected following the 2011 revolution; the benchmark index TUNINDEX 2 saw its largest cumulative decline at 21% before recovering for the rest of the year and finishing 2011 with a lower value of 7.6% 3 . Tunisian 2011 experiment turns out to have a very crucial impact on the Tunisian stock market (Jeribi, Jarboui & Fakhfekh, 2015). Unfortunately, the political uncertainty, as manifested by instable financial market and sluggish economy, could shake the confidence of national and international investors.…”