Eskandar Tooma

Calendar anomolies and stock market volatility in selected Arab stock exchanges

While seasonal effects for both advanced and emerging markets have been investigated extensively in mean and variance equations, Arab region asset markets have received much less attention. The objective of this article is to fill this gap in the literature by investigating the day-of-the-week effect in 12 major Arab stock markets using Arab Monetary Fund (AMF) daily index returns from May 2002 to December 2005. Our estimation strategy utilizes Autoregressive (AR) and Generalized Autoregressive Conditional Heteroscedastic (GARCH)-type specifications to allow for a time-varying variance. Among the most important results of this article are, first, is one-third of these markets exhibit significant day-of-the-week effect in returns. Second, two-third of these markets exhibit significant day-of-the-week effect on volatility. Third, most of these day-of-the-week effects are focused within the beginning and the end of the trading week. Finally, the existence of a significant risk premium was confirmed in five of the 12 studied markets.

An investigation of intraday price discovery in cross-listed emerging market equities

ABSTRACT We investigate multi-market price discovery using two year intraday data for Egyptian and Argentinean depository receipts and their underlying stock. The contribution of the local versus international exchange to price discovery is assessed using the Gonzalo and Grangers permanent-transitory common factor model. Whereas price discovery in the local market for Egyptian equities accounted for 75,8% of the price discovery in the DR, the result was mixed for the Argentinean equities, with an average of only 41,67% of DR prices determined in the local market. We find that size of the company, liquidity and trading volume explain the contribution of each market.

Modeling the Egyptian Stock Market Volatility Pre- and Post Circuit Breaker

Circuit breakers (price limits and trading halts) are regulatory instruments aiming to reduce severe price volatility and provide markets with a cooling off period. The paper investigated empirically, using daily returns of two Egyptian Stock Market indices the Hermes Financial Index (HFI) and the Egyptian Financial Group Index (EFGI) during the period January 1993 - December 2001, the impact of regulatory policies on conditional volatility estimation. The paper examined four models GARCH, EGARCH, GJR, and APARCH under variety of density functions (Gaussian normal distribution, Student-t distribution, Skewed Student-t and Generalized Exponential Distribution (GED)). The empirical evidence provided in this paper confirms Mecagni and Sourial (1999) findings that the symmetric price limits on individual shares failed to dampen volatility in the market. Furthermore, regulatory and/or structural shifts in the market results in different conditional volatility model structure and using asymmetric models for conditional volatility estimation rather than symmetric models provide better results.

The effect of political uprisings on the location of price discovery: : Evidence from egyptian cross-listed equities

Abstract: In this study, we aim to determine the location of price discovery for Egyptian cross-listed stocks around the political uprising that started on January 25, 2011, and resulted in a two-month stock market closure. We measure price discovery using Gonzalo and Grangers component share and Hasbroucks information shares and find that, for some stocks, the contribution of the foreign market in pricing cross-listed equities increases in the period directly following the reopening of the Egyptian stock market. We discuss the factors that could explain the more pronounced shifts in the location of price discovery for some companies in the post-uprising period.

Extracting shadow exchange rates and foreign exchange premia during currency crises: an example from Egypt

ABSTRACT We utilize high-frequency data and a novel synchronous trade-matching algorithm to show that shadow exchange rates could be estimated from price spreads between depositary receipts and their underlying local stocks using an example of the recent Egyptian currency crisis. These shadow rates reflect the local black market foreign exchange rates in addition to a foreign exchange premium, which we attribute to the cost of expatriating capital during currency and capital control periods.

Trading Better Versus Making More: Evidence from an Emerging Market

ABSTRACT Using transaction data from Egypt, we examined the controversy over which investor—domestic or foreign—has superior trading performance in emerging markets. We account for informational and behavioral differences across investors by classifying them by origin and type and comparing their performance in trade execution versus profitability. Domestic institutions execute trades at the best prices with the greatest advantage against foreign institutions. This advantage is reduced when foreign institutions focus on large firms and trades. Profitability analysis revealed, however, that domestic investors accrue significant losses against foreign investors, suggesting that trading better does not necessarily translate into making more money.

Incorporating swarm behavior into the adaptation mechanism of an order-driven artificial financial market

Agent-based artificial financial markets are an area of increasing interest in computational finance. Recent work by LeBaron and Yamamoto proposes an order-driven market model based on evolutionary algorithm based artificial agents. In this paper, we present a mechanism for incorporating elements of swarm intelligence into this model, and find that our model produces market price behavior that, in some ways, is closer to that of real financial markets.