An Empirical Examination of Stability, Predictability, and Volatility of Middle Eastern and African Emerging Stock Markets

This paper examines the stability, predictability, volatility, time varying risk premiums and persistence of shocks to volatility in the ten Middle Eastern and African (MEA and the volatility movement affects the stock market returns. In summary, eight emerging markets have volatility clustering and one market shows positive and significant time varying risk premiums. Overall, the results fail to indicate time varying risk premium in nine of the ten ME&A markets. Although many of the emerging markets in ME&A regions are in the formative stage, it is felt that ME&A equity markets are where investors may find a good return for the investment, considering the trade-off between risk and return. In particular, the correlation is found to be low, which provides investors with the opportunity for diversification.