Asset pricing in the Middle East's equity markets
Asset pricing in the Middle East's equity markets
This paper undertakes a comparison between five multifactor variants of the capital asset pricing model. These include additional factors based on size, book to market value, momentum, liquidity and a new investor protection metric based on the product of institutional quality in a country and the proportion of free float shares, which captures the impact of controlling block holders. Using monthly returns of 909 blue chip firms from 18 Middle East & North African equity markets for 16 years, we show that a two factor CAPM augmented with a factor mimicking portfolio based on the investor protection metric yields the highest explanatory power. Analysis of Kalman filter time varying investor protection betas reveals investor protection premiums in Egypt, Iraq, Lebanon and Tunisia and corresponding discounts in Israel, Saudi Arabia, Kuwait, Oman, Dubai and Abu Dhabi.
CAPM, Emerging financial markets, Investor protection, Middle East & North Africa
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Li, Jing
12d3e307-c01d-4e6a-aaa8-46935bb8d6cb
Mykhayliv, Dariya
531144d6-61e4-4454-9dca-163cef159387
Waqas, Muhammad
778ff672-1564-449d-b262-a56b6b19e359
3 April 2021
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Li, Jing
12d3e307-c01d-4e6a-aaa8-46935bb8d6cb
Mykhayliv, Dariya
531144d6-61e4-4454-9dca-163cef159387
Waqas, Muhammad
778ff672-1564-449d-b262-a56b6b19e359
Hearn, Bruce, Li, Jing, Mykhayliv, Dariya and Waqas, Muhammad
(2021)
Asset pricing in the Middle East's equity markets.
Journal of International Financial Markets, Institutions and Money, 72, [101337].
(doi:10.1016/j.intfin.2021.101337).
Abstract
This paper undertakes a comparison between five multifactor variants of the capital asset pricing model. These include additional factors based on size, book to market value, momentum, liquidity and a new investor protection metric based on the product of institutional quality in a country and the proportion of free float shares, which captures the impact of controlling block holders. Using monthly returns of 909 blue chip firms from 18 Middle East & North African equity markets for 16 years, we show that a two factor CAPM augmented with a factor mimicking portfolio based on the investor protection metric yields the highest explanatory power. Analysis of Kalman filter time varying investor protection betas reveals investor protection premiums in Egypt, Iraq, Lebanon and Tunisia and corresponding discounts in Israel, Saudi Arabia, Kuwait, Oman, Dubai and Abu Dhabi.
Text
MENA Liq-CAPM
- Accepted Manuscript
More information
Accepted/In Press date: 17 March 2021
e-pub ahead of print date: 22 March 2021
Published date: 3 April 2021
Additional Information:
Publisher Copyright:
© 2021 Elsevier B.V.
Keywords:
CAPM, Emerging financial markets, Investor protection, Middle East & North Africa
Identifiers
Local EPrints ID: 482120
URI: http://eprints.soton.ac.uk/id/eprint/482120
ISSN: 1042-4431
PURE UUID: 47c47458-e986-4e5a-95bb-fe99a0b0a9ea
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Date deposited: 19 Sep 2023 17:02
Last modified: 18 Mar 2024 03:48
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Contributors
Author:
Jing Li
Author:
Dariya Mykhayliv
Author:
Muhammad Waqas
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