Mahmoud Haddad

Intertemporal Test of Beta Stationarity Performance of Islamic Sector Structured Mutual Funds

The purpose of this research paper is to examine social Islamic mutual funds’ financial performance. Since Islamic mutual funds have only been around for the past two decades, most of the research on this topic is fairly new. In this study we apply the single factor model of Schwert and Seguin (1990) to a sample of Islamic mutual funds. The Islamic mutual funds market is one of the fastest growing sectors within the Islamic financial system. Several studies have investigated the characteristics of individual Islamic mutual funds (see Elfakhani, et al (2006), Elfakhani ,et al (2005), and Hassan, et al (2005). We are not aware of any studies that have applied the Schwert and Seguin methodology to Islamic mutual funds. Such an application is important because it allows for studying the impact of market volatility on the time variation of monthly betas and the corresponding returns. Using the S&P 500 and the FTSE Global Islamic indices on sector structured Islamic mutual funds, our results suggest that the volatility of the market and that of the Islamic mutual funds portfolio behave differently with inter and intra market proxies. There is also evidence that the volatility persistence of each Islamic mutual fund portfolio and its systematic risk are significantly related. Hence, the systematic risks of different portfolios tend to move in a different direction during periods of increased market volatility. As a result, we gain an insight into the return dynamics and the process by which Islamic mutual funds prices are determined.

The cost of sovereign lending in the Middle East after September 11

One of the casualties in the aftermath of the attacks on September 11 has been global confidence in the Middle East. Sovereign risk – the credit risk assessment to the obligations of central governments – is believed to have increased. Using data from JP Morgan, Moodys, S&P, and the World Bank, we explain and quantify the variability of sovereign risk in five MENA countries between 1998 and 2002. Three immediate implications emerge from our results. Our findings help policymakers in MENA countries (1) better understand how financial markets are pricing their risk, (2) identify the specific risk bins which influence their credit spreads, and (3) suggest mitigation techniques on how their sovereign risk can be reduced.

Cost/Benefit Analysis of Establishing an Offshore Banking Center: The Case of Anchorage

The unabated fluctuation of oil prices in the world markets and their drastic decline since 1985 has prompted the state of Alaska, and other states whose economies rely primarily on oil, to look more seriously into the possibilities of diversifying the sources of their income. One possibility is to consider the establishment of an international financial center (IFC) in Anchorage, the largest city in Alaska. The proposed center would function as an interbank market, comprised of foreign and local financial institutions, in which short-term, medium-term and long-term international lending and borrowing—for purposes of investment, financing, hedging, and speculation—denominated in Eurocurrencies are consummated. Lenders and borrowers would include multinational corporations, banks, and governments.

Are banks effective in the economic recovery from the Arab Spring

We analyze the role of banks in Bahrain, Egypt, Libya, Tunisia, and Yemen, pre- and post-revolution, and find that the volume of credit they offered to the private sector was neutral to real economic growth. Supported by a recent IMF study which ranks banking regulation and supervision ‘poor’ or ‘below-average’ in four out of the five countries under study, we attribute the limited effectiveness of their banks to government intervention in credit allocation and pricing. Our results cast doubt on the banks’ ability to facilitate an economic recovery, and suggest that a monetary policy focused on bank credit alone may not be successful.

Have Foreign Banks Contributed to the Spread of the Global Financial Crisis to Saudi Arabia

The authors analyzed the role of domestic and foreign banks in Saudi Arabia during the financial crisis that has ravaged the world since 2007. The study is based on the growth rate in market share of the credit extended by each bank and investors’ perceptions about the risk exposure of this financial institution, distinguishing between purely domestic banks and institutions with joint ownership (local and foreign shareholders). Although there is a suspicion that partly owned foreign banks are more risk exposed than their purely domestic counterparts, these findings suggest otherwise. Specifically, the authors do not find evidence that foreign shareholders of Saudi banks, who suffered losses and liquidity problems in their home countries, cut credit in Saudi Arabia or acted in a manner inconsistent with their domestic counterparts. As such, the evidence does not support recommendations for a double standard in banking regulation.

An Empirical Analysis of the Day-of-the-Week Effect in Stock Returns: The Case of U.S. and Japan

This article employs daily closing index data to investigate the relationship between the U.S. and Japanese equity markets. It reassesses and extends the Becker et al. (1990) methodology over a longer sample space. The article then advances the analysis further by estimating structural equation models and by including the exchange rate as an additional explanatory variable. The resulting multivariate econometric design shows that the U.S. equity market strongly affects the Japanese equity market Monday through Friday while the Japanese market exerts a weaker influence on the U.S. market with the influence observed only on Mondays and Wednesdays.