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Business and Economics > Investments: Stocks

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Cover IMF Working Papers
The Jordanian Stock Market—Should You Invest in It for Risk Diversification or Performance?
Mr. Martin Petri
and
Tahsin Saadi Sedik
We analyze the performance of the Amman Stock Exchange (ASE) and its integration with other markets. Using cointegration techniques, we find that the ASE and other Arab stock markets are cointegrated, which implies little long-run risk diversification. However, there is no cointegrating relationship between the ASE and other emerging or developed stock markets. Two of the main regional stock markets-Kuwait and Saudi Arabia-Grangercause the Jordanian stock market. The paper finds that there may have been some overvaluation at end-2005, but that the market correction in early 2006 and strong recent earnings growth have reduced overvaluation concerns.
Keywords:
WP; ASE index; dividend yield; U.S. dollar; price index
Cover IMF Working Papers
Informational Efficiency in Developing Equity Markets
Mr. C. John McDermott
and
Mr. Paul Cashin
The issue of informational efficiency in the evolution of asset prices is examined using data on equity markets in Jordan, Turkey and Pakistan over the period 1986–93. The analysis is carried out in two steps. The parameters of agents’ dynamic consumption and investment decisions are first estimated, and then the implied equity market price, based on market fundamentals, is compared with the actual evolution of equity market prices. While the informational efficiency of each of the three markets is found to be deficient, the causes of market inefficiency are varied. For Jordan it appears that a large negative shock to economic activity in the late 1980s caused agents to discount market fundamentals. For Turkey and Pakistan it is likely that institutional and legal rigidities in equity and banking markets resulted in these markets being illiquid, although this lack of market depth did reduce in severity for Turkey over the sample period, as liberalization of financial markets occurred.
Keywords:
WP; informational efficiency; utility function; market fundamentals; banking market; asset market liberalization; rate of return; market efficiency; market movement; financial market regulation; market information; Stock markets; Stocks; Asset prices; Consumption; Estimation techniques; Global; Middle East
Cover IMF Working Papers
Emerging Equity Markets in Middle Eastern Countries
Mr. Mohamed A. El-Erian
and
Mr. Manmohan S. Kumar
Within a broad framework for analyzing portfolio capital flows to developing countries, the paper undertakes a comparative analysis of equity markets in six Middle Eastern countries. The analysis, based primarily on a range of quantitative indicators, identifies the principal characteristics of these markets, including relative to international comparators, and examines associated structural features. This, along with an analysis of the informational efficiency of selected markets in the region, provides a basis for the subsequent review of policies for enhancing the role of equity markets in the macroeconomy of Middle Eastern countries.
Keywords:
WP; secondary market; constant dollars; market capitalization; price change; private sector; intrinsic value; rate of return; bull market; export market opportunity; financial support; reduction operation; market place; opportunity cost; Stock markets; Emerging and frontier financial markets; Stocks; Capital markets; International capital markets; Middle East