Did financial market integration really happen in MENA region? - An analysis

This paper examines the characteristics and behavior of stock market equity indices of several middle east and north africa (mena) countries. it also explores the cointegrating behavior of the mena stock markets with the united states equity markets. granger causality tests based on the vecm reveal strong bidirectional causalities between several of the mena stock markets. the granger causalities also indicate that stock market returns of egypt,jordan,kuwait,malta,oman,qatar,saudi arabia and tunisia exhibit cointegrating behavior. the results reveal significant weak exogeneity from the united states stock markets to all the mena stock markets. the findings suggest that while mena stock markets tend to co-move with the u.s. stock market. furthermore,markets within the mena region are not yet fully integrated with the u.s. however,market imperfections may preclude u.s. investors from entering mena markets to take advantage of possible diversification benefits. the increased level of integration of markets within the mena region does not necessarily reduce the potential of risk diversification for international portfolios.