Volatilité excessive et caractéristiques comportementales entourant la période de crise: données probantes des marchés émergents de la région MENA (document en anglais)

Introduction :

The objective of the paper below is to examine the stock market volatility in eight emerging markets in the MENA region. Using data of 250 companies listed in stock markets of Jordan, Kuwait, Morocco, Saudia Arabia, UAE, Egypt, Qatar and Bahrain,

The results show evidence of the existence of excess volatility episodes before and during the crisis period and there are jumps in the stock price volatility in the MENA region during the period of study.

The analysis shows also the presence of excess volatility during the study period before, during and after the crisis period which indicates a clear departure from EMH.

The results show that the volatility during the pre crisis period is unexpectedly significantly higher than that of the crisis period.

Volatility is well documented phenomenon of stock price behavior in financial markets. Excess volatility is defined as the level of volatility over that which is predicted by the Efficient Market theory.

Shiller (1990) shows that the excess volatility in financial markets is an expression of investors psychological beliefs and that the EMH cannot totally explain the market volatility.

I-The litterature review :

 Engle (1982) shows that the dynamics of financial fundamentals and investors behavior impacts substantially the volatility distribution. He introduced the ARCH (autoregressive conditionally heteroscedastic) in which the variance at time “t” is modeled as a linear combination of past squared residuals

 Bolerslev (1986) introduced a more general model GARCH (generalized ARCH) process in which the variance model looks more like an Autoregressive moving average (ARMA) than just an Autoregressive process.

 Engle (1982) and Bolerslev (1982) recognize that the volatility in not constant over time. Large stock price changes tend to be followed by large changes and small changes tend to follow small changes.

 Schwert (1989) has done a time series analysis of the volatility of U. S. stock prices 1859- 1986 and found that the volatility of inflation, money growth, industrial production and business failures is high during war periods, yet the volatility of stock returns is not particularly high during those periods.

 Harvey (1995) and Aggarwal et al (2000) show that emerging markets exhibit high stock price volatility

 LeRoy (2005) suggests that stock price volatility systematically exceeds that justified by fundamentals

II-Methodology and empirical results :

1- Volatility clusters

The paper of Schwert (1989) initiated a new line of research directed toward examining aggregate volatility. The main focus is to understand the stock market volatility behavior during specific periods and how the level of volatility relates to that of key macroeconomic variables.

His results reveal that the stock volatility is not closely related to the volatility of other economic variables. He referred to this conclusion as a “puzzle”.

Bates (2000), Duffie, et al. (2000) and Pan (2001) argue that the evidence points toward the presence of positive jumps in volatility.while eraker

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