Walid Mensi

Asymmetric Linkages between BRICS Stock Returns and Country Risk Ratings: Evidence from Dynamic Panel Threshold Models

This study investigates the asymmetric linkages between the five BRICS (Brazil, Russia, India, China and South Africa) countries’ stock markets and three country risk ratings (financial, economic and political risk) in the presence of major global economic and financial factors. Using the dynamic panel threshold models, we find evidence of asymmetry in most cases. However, the significance and the signs of the effects of these risk ratings on the BRICS market returns differ across the lower and upper regimes. Furthermore, improvements in the global stock, West Texas Intermediate (WTI) and gold markets enhance the BRICS stock market performance. Increases in implied volatility indices lead to drops in the BRICS markets.

Analysing dynamic linkages and hedging strategies between Islamic and conventional sector equity indexes

ABSTRACT This study analyses the dynamic spillovers across 10 Dow Jones Islamic and conventional sector index pairs. Using various multivariate GARCH models, the results show significant time-varying conditional correlations for all the pairs. Moreover, there is evidence that the conditional correlations for all the sector pairs, except those of the Telecommunication and Utilities sectors, increase after the onset of the global financial crisis (GFC), suggesting non-subsiding risks, contagion effects and gradual greater financial linkages. The Islamic sectors’ risk exposure can be effectively hedged over time in diversified portfolios containing conventional sector stocks. These results provide several practical implications for portfolio managers and policymakers in regard to optimal asset allocations, portfolio risk management and the diversification benefits among these markets.

Crude oil market efficiency: An empirical investigation via the Shannon entropy

This paper evaluates the time-varying degrees of weak-form efficiency of the crude oil markets using the Modified Shannon Entropy (MSE) and the Symbolic Time Series Analysis (STSA) approach. Using daily data from May 20, 1987 to March 6, 2012 for two worldwide crude oil benchmarks (West Texas Intermediate and Europe Brent), our findings reveal that the weak-form market efficiency of two oil markets evolves through time, but with different time trends. Moreover, the WTI market appears to be less efficient than the Europe Brent. These results have several implications for commodity portfolio hedgers and policymakers.

Impact of macroeconomic factors and country risk ratings on GCC stock markets: evidence from a dynamic panel threshold model with regime switching

ABSTRACT This study examines the non-linear relationship between stock markets in GCC countries and their country risk ratings as well as with major macroeconomic factors. Based on a dynamic panel threshold model with two and four regimes, the results provide evidence of short-term asymmetry between first-lagged GCC stock returns and the performance of GCC stock markets. In addition, only the financial risk (FR) rating has a significant positive effect on the performance of GCC stock markets according to the prevailing regimes for the GCC lagged returns and the Brent oil market. Among the macroeconomic factors, improvements in the global stock markets, the MSCI Global Islamic Index, and the oil price increased the performance of GCC stock markets, whereas increases in the gold price, the 3-month U.S. Treasury bill rate, and the U.S. Treasury bond rate reduced the performance of the GCC stock markets. These results have important implications for investors, policymakers, and portfolio managers.

Ranking efficiency for twenty-six emerging stock markets and financial crisis: Evidence from the shannon entropy approach

Abstract In this paper the evolution of a weak-form efficiency for twenty six emerging stock markets is tested. To do this, a modified Shannon entropy and a Symbolic Time Series Analysis are employed over the period September 1997 to November 2007. A regression is performed for time windows with 100 observations and a rolling sample approach. The empirical results show that stock market efficiency changes over time and differs from one market to another and across geographic areas. For example, the Argentinian market is a more efficient market whereas the Tunisian stock market is less efficient. The inefficiency in stock markets is dynamic. Furthermore, a negative relationship was found between the financial crisis and stock market efficiency. The findings of this evolving market efficiency may be attributed to microstructure variables. These results have several implications for stock portfolio hedgers and policy makers.

Dynamic Global Linkages of the BRICS Stock Markets with the United States and Europe Under External Crisis Shocks: Implications for Portfolio Risk Forecasting

Crisis shocks often lead to changes in the interdependence across stock markets, and thus risk assessment and management. This paper investigates the extent to which the global financial crisis of 2008-2009, which was triggered by the US subprime crisis in 2007, and the European debt crisis started at the end of 2009, affect the interdependence of the leading emerging markets of the BRICS countries with those of the United States and Europe. Our empirical analysis makes use of the FIAPARCH model combined with the Dynamic Equicorrelation (DECO-FIAPARCH), which allows for the estimation of market linkage for a large group of countries as a whole, while controlling for asymmetric volatility and long memory. The results reveal the presence of important changes in the time-varying linkages of the BRICS stock markets with the US and European ones. In particular, the average linkages have significantly been higher between 2007 and the first half of 2012 than the remaining part of the sample, and there is also evidence of structural change around the Lehman Brothers collapse. We also show the effects of these stylized facts on portfolio risk assessment and forecasting.

Board effectiveness, conglomerate diversification, and firm performance: The tunisian case

Abstract This paper investigates the link between board structure and firm performance. The impact of conglomerate diversification on the relationship between board effectiveness and firm performance is also examined. Boards of director effectiveness, including board composition, board size, institutional ownership, and aspects of board leadership including CEO duality are addressed in the Tunisian context. The study employs a dynamic model to study twenty-eight non-banking companies listed on the Tunis Stock Exchange over the period 1997–2003. The empirical results are mixed and are consistent with previous studies particularly in the Tunisian context. Evidence was found that conglomerate diversification is negative and statistically significant to both board effectiveness and firm performance, which increases the conflict of interest between managers and shareholders and leads to the expropriation of minority shareholders rights. These findings have several implications for understanding the opportunistic behavior of managers.