Price and Volatility Spillovers in MENA Stock Markets

While new evidence on international spillover effects has been widely discussed around the globe, the MENA (Middle East and North African) region has received little attention concerning international transmission of stock market movements. In this paper, we discuss international spillover effects between the major developed markets (US, Japan and Germany) and the emerging markets in the MENA region (Turkey and Egypt). While GARCH‐type models have mainly been used to investigate international stock market spillovers in much of previous studies, we develop new testing strategies based on discrete wavelet decomposition. The basic finding is that price as well as volatility spillover effects exist from the developed stock markets to the MENA counterparts, although evidence for price spillover to the Egyptian market is rather weak. As for the interdependence of the major MENA stock markets, no spillover effects are found between these markets, while the two MENA markets are somewhat related with each other.