What are the risks when investing in thin emerging equity markets: Evidence from the Arab world

Cointegration and Dynamic Linkages of International Stock Markets: An Emerging Market Perspective

“…Accordingly, no wonder that the stock market of Egypt exhibits poor long-term comovements with major world markets. Consistent with this explanation, Girard and Omran (2007) demonstrate that although Egypt has recently embarked on a process of privatization and stock market liberalization to deepen its markets and ameliorate corporate governance, critical issues related to financial transparency and political instability still represent a conspicuous stumbling-block to international investments, and that risk factors, in particular political risk, are likely to remain significant in this nascent emerging market.…”

Effect of the Political Risk on Capital Asset Valuation in Financial Markets: The Case of Turkey

“…Considering the studies examining the relationship between financial markets and political risks, it is seen that this effect has been handled by the panel data obtained especially from emerging markets (Mei, 1999;Perotti and van Oijen, 2001;Bilson, Brailsford and Hooper, 2002;Girard and Omran, 2007;Yartey, 2008;Henderson and Rodriguez, 2008;Dutta, 2009;Lehkonen and Heimonen 2015;Ghosh, 2016). Additionally, Dimic, Orlov, and Piljak (2015), analyze the effect of political risk on stock markets in the context of emerging, frontier and developed stock markets classification by panel data.…”

“…However there are studies dealing with this issue on the basis of only one country as well (He, 1999;Kim and Mei, 2001;Yaprakli and Gungor, 2007;Sanlisoy and Kok, 2010;Suleman, 2012;Abdulqadir and Yaroson, 2013;Gul, Khan, Saif and Ur, 2013;Ada, Bolak, and Suer, 2013). Among the studies analyzing the effect of political risk on emerging markets, studies such as Bilson, Brailsford, and Hooper, (2002), Girard and Omran (2007) and Dutta (2009) can be seen utilizing CAPM as the method of the analysis. On the other hand, Atilgan, Demirtas, and Erdogan (2015) prefer Arbitrage Pricing Theory (APT) in order to investigate the relationship between macroeconomic factors and stock returns.…”

“…Among these studies, Mei (1999), Keles (2007), Girard and Omran (2007), Yartey(2008), Dutta(2009), Sanlisoy and Kok (2010), Cam (2014), Kaya, Gungor and Ozcomak (2014), Dimic, Orlov and Piljak (2015), Erkocak and Cam (2015), Kara and Karabiyik (2015), Lehkonen and Heimonen (2015) prefer packet data published by institutions like ICB (International Crisis Behavior), ICRG or IFC; while Yaprakli and Gungor (2007), Bekaert, Harvey, Lundblad and Siegel (2012) prefer political risk premiums and finally He (1999), Kim and Mei(2001), Suleman (2012), Abdul-Qadir and Yaroson (2013), Gul et al (2013) and Ada et al (2013) take political events and news in the form of dummy variable as the indicator of political risk.…”

“…On the other hand, Suleman (2012), despite finding out a significant relation among political news and stock returns and market volatility, indicates that oil and gas, finance sector and health sector are not affected by such news. Of all the political risk components, factors like corruption (Girard and Omran, 2007;Abdul-Qadir and Yaroson, 2013), terrorism (Gul et al, 2013), political (in)stability (Kim and Mei, 2001;Keleş, 2007;Girard and Omran, 2007;Henderson and Rodriguez, 2008;Sanlisoy and Kok, 2010), democratic accountability (Girard and Omran, 2007), socio-economic conditions (Girard and Omran, 2007), political elections or the regime (Mei, 1999;Dutta, 2009;Ada et al, 2013;Lehkonen and Heimonen, 2015), external conflict (Girard and Omran, 2007), bureaucracy quality (Yartey, 2008), law and order (Yartey, 2008) are found to be effective. Alternatively, Ghosh (2016) investigates the interaction between political and financial components in the context of banking sector.…”