Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance

Hayet Soltani; Mouna Boujelbene Abbes; Abderrahmen Aloulou

doi:doi:10.11648/j.ijfbr.20210705.12

| Peer-Reviewed

Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance

Hayet Soltani, Mouna Boujelbene Abbes, Abderrahmen Aloulou

Published in International Journal of Finance and Banking Research (Volume 7, Issue 5)

Received: 16 July 2021 Accepted: 15 September 2021 Published: 27 September 2021

Views: Downloads:

Download PDF

Share This Article

Twitter
Linked In
Facebook

Abstract

This article assesses the effect of financial stress caused by the great depression, 2008–2009, Oil crises of 2014–2015 accompanied by the sharp fall in the oil prices and the Arab Spring on the co-movements and volatility spillovers of aggregated Financial Stress Indices for eleven MENA countries. It is reveals that the extreme values of the FSIs are generally connected with well-known past financial stress episodes. We also found, for MENA Ex GCC countries, a weak interconnection between these countries while the GCC countries are more connected. Using a Vector auto-regression (VAR) estimation framework, we showed that the performance of the stock indices depends positively on its past and also, the stress index positively depends on his past delayed either by one or two periods. While, the study of impulse response functions shows that a positive shock on the financial stress index translates into a negative effect on stock market performance during the first year. This effect then disappears in slow motion before finding its long-term level.

Published in	International Journal of Finance and Banking Research (Volume 7, Issue 5)
DOI	10.11648/j.ijfbr.20210705.12
Page(s)	111-122
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Financial Stress, Financial Stress Index, Market Performance, VAR Estimation, Impulse Response Function

References

[1]	Reinhart, C. M., & Rogoff, K. S. (2014). Recovery from financial crises: Evidence from 100 episodes. American Economic Review, 104 (5), 50-55.
[2]	Polat, O., & Ozkan, I. (2019). Transmission mechanisms of financial stress into economic activity in Turkey. Journal of Policy Modeling, 41 (2), 395-415.
[3]	Illing, M., & Liu, Y. (2006). Measuring financial stress in a developed country: An application to Canada. Journal of Financial Stability, 2 (3), 243-265.
[4]	Hakkio, C. S., & Keeton, W. R. (2009). Financial stress: what is it, how can it be measured, and why does it matter?. Economic Review, 94 (2), 5-50.
[5]	Balakrishnan, R., Danninger, S., Elekdag, S., & Tytell, I. (2011). The transmission of financial stress from advanced to emerging economies. Emerging Markets Finance and Trade, 47 (sup2), 40-68.
[6]	Cevik, E. I., Dibooglu, S., & Kutan, A. M. (2013a). Measuring financial stress in transition economies. Journal of financial stability, 9 (4), 597-611.
[7]	Cardarelli, R., Elekdag, S., & Lall, S. (2011). Financial stress and economic contractions. Journal of Financial Stability, 7 (2), 78-97.
[8]	Louzis, D. P., & Vouldis, A. T. (2013). A financial systemic stress index for Greece.
[9]	Cevik, E. I., Dibooglu, S., & Kenc, T. (2013b). Measuring financial stress in Turkey. Journal of Policy Modeling, 35 (2), 370-383.
[10]	Dahalan, J., Abdullah, H. B., & Umar, M. (2016). Measuring financial stress index for Malaysian economy. International Journal of Economics and Financial Issues, 6 (3).
[11]	Duprey, T., Klaus, B., & Peltonen, T. (2017). Dating systemic financial stress episodes in the EU countries. Journal of Financial Stability, 32, 30-56.
[12]	El-Shal, A. (2012, December). The spillover effects of the global financial crisis on economic activity in emerging economies–investigating the Egyptian case using the financial stress index. In Economic Research Forum Working Papers (No. 737).
[13]	Cevik, E. I., Dibooglu, S., & Kenc, T. (2016). Financial stress and economic activity in some emerging Asian economies. Research in International Business and Finance, 36, 127-139.
[14]	Tng, B. H., Kwek, K. T., & Sheng, A. (2012). Financial stress in ASEAN-5 economies from the Asian crisis to the global crisis. The Singapore Economic Review, 57 (02), 1250013.
[15]	Ekinci, A. (2013). Financial stress index for Turkey. Doğuş Üniversitesi Dergisi, 14 (2), 213-229.
[16]	Duca, M. L., & Peltonen, T. A. (2013). Assessing systemic risks and predicting systemic events. Journal of Banking & Finance, 37 (7), 2183-2195.
[17]	Zigraiova, D., & Jakubik, P. (2015). Systemic event prediction by an aggregate early warning system: An application to the Czech Republic. Economic Systems, 39 (4), 553-576.
[18]	Park, C. Y., & Mercado Jr, R. V. (2014). Determinants of financial stress in emerging market economies. Journal of Banking & Finance, 45, 199-224.
[19]	Baxa, J., Horváth, R., & Vašíček, B. (2013). Time-varying monetary-policy rules and financial stress: Does financial instability matter for monetary policy?. Journal of Financial Stability, 9 (1), 117-138.
[20]	Yiu, M. S., Ho, W. Y. A., & Jin, L. (2010). A measure of financial stress in Hong Kong financial market–the financial stress index. Hong Kong Monetary Authority Research Note, 2, 2010.
[21]	Rey, H., (2009). Discussion of How Linkages Fuel the Fire. http://www.internationalgrowthcentre.org/index.php?q=node/376.
[22]	Holló, D., Kremer, M. & Duca, M. (2012). CISS – A Composite Indicator of Systemic Stress in the Financial Sector. ECB Working Paper Series, No. 1426.
[23]	Balakrishnan R., Danninger S, Elekdag S., and Tytell I. (2009). “The Transmission of Financial Stress from Advanced to Emerging Economies”, IMF Working Papers /09/133, June 2009.
[24]	MacDonald, R., Sogiakas, V., & Tsopanakis, A. (2018). Volatility co-movements and spillover effects within the Eurozone economies: A multivariate GARCH approach using the financial stress index. Journal of International Financial Markets, Institutions and Money, 52, 17-36.
[25]	Kaminsky, G. L., & Reinhart, C. M. (1999). The twin crises: the causes of banking and balance-of-payments problems. American economic review, 89 (3), 473-500.
[26]	Acemoglu, D., Hassan, T. A., & Tahoun, A. (2018). The power of the street: Evidence from Egypt’s Arab Spring. The Review of Financial Studies, 31 (1), 1-42.
[27]	Kim, J. H., & Doucouliagos, H. (2005). Realized volatility and correlation in grain futures markets: Testing for spill-over effects. Available at SSRN 791264.
[28]	Canarella, G., Miller, S. M., & Pollard, S. K. (2009). Dynamic stock market interactions between the Canadian, Mexican, and the United States markets: The NAFTA experience. Nova Science Publishers, Inc., 4^th Quarter.
[29]	Eun, C. S., & Shim, S. (1989). International transmission of stock market movements. Journal of financial and quantitative Analysis, 24 (2), 241-256.

Cite This Article

Plain Text BibTeX RIS

APA Style

Hayet Soltani, Mouna Boujelbene Abbes, Abderrahmen Aloulou. (2021). Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance. International Journal of Finance and Banking Research, 7(5), 111-122. https://doi.org/10.11648/j.ijfbr.20210705.12

Copy | Download

ACS Style

Hayet Soltani; Mouna Boujelbene Abbes; Abderrahmen Aloulou. Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance. Int. J. Finance Bank. Res. 2021, 7(5), 111-122. doi: 10.11648/j.ijfbr.20210705.12

Copy | Download

AMA Style

Hayet Soltani, Mouna Boujelbene Abbes, Abderrahmen Aloulou. Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance. Int J Finance Bank Res. 2021;7(5):111-122. doi: 10.11648/j.ijfbr.20210705.12

Copy | Download

@article{10.11648/j.ijfbr.20210705.12,
  author = {Hayet Soltani and Mouna Boujelbene Abbes and Abderrahmen Aloulou},
  title = {Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance},
  journal = {International Journal of Finance and Banking Research},
  volume = {7},
  number = {5},
  pages = {111-122},
  doi = {10.11648/j.ijfbr.20210705.12},
  url = {https://doi.org/10.11648/j.ijfbr.20210705.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20210705.12},
  abstract = {This article assesses the effect of financial stress caused by the great depression, 2008–2009, Oil crises of 2014–2015 accompanied by the sharp fall in the oil prices and the Arab Spring on the co-movements and volatility spillovers of aggregated Financial Stress Indices for eleven MENA countries. It is reveals that the extreme values of the FSIs are generally connected with well-known past financial stress episodes. We also found, for MENA Ex GCC countries, a weak interconnection between these countries while the GCC countries are more connected. Using a Vector auto-regression (VAR) estimation framework, we showed that the performance of the stock indices depends positively on its past and also, the stress index positively depends on his past delayed either by one or two periods. While, the study of impulse response functions shows that a positive shock on the financial stress index translates into a negative effect on stock market performance during the first year. This effect then disappears in slow motion before finding its long-term level.},
 year = {2021}
}

Copy | Download

TY  - JOUR
T1  - Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance
AU  - Hayet Soltani
AU  - Mouna Boujelbene Abbes
AU  - Abderrahmen Aloulou
Y1  - 2021/09/27
PY  - 2021
N1  - https://doi.org/10.11648/j.ijfbr.20210705.12
DO  - 10.11648/j.ijfbr.20210705.12
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 111
EP  - 122
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20210705.12
AB  - This article assesses the effect of financial stress caused by the great depression, 2008–2009, Oil crises of 2014–2015 accompanied by the sharp fall in the oil prices and the Arab Spring on the co-movements and volatility spillovers of aggregated Financial Stress Indices for eleven MENA countries. It is reveals that the extreme values of the FSIs are generally connected with well-known past financial stress episodes. We also found, for MENA Ex GCC countries, a weak interconnection between these countries while the GCC countries are more connected. Using a Vector auto-regression (VAR) estimation framework, we showed that the performance of the stock indices depends positively on its past and also, the stress index positively depends on his past delayed either by one or two periods. While, the study of impulse response functions shows that a positive shock on the financial stress index translates into a negative effect on stock market performance during the first year. This effect then disappears in slow motion before finding its long-term level.
VL  - 7
IS  - 5
ER  -

Copy | Download

Author Information

Hayet Soltani

Faculty of Economics and Management of Sfax, Economic and Management Laboratory (LEG), University of Sfax, Sfax, Tunisia
Mouna Boujelbene Abbes

Faculty of Economics and Management of Sfax, Economic and Management Laboratory (LEG), University of Sfax, Sfax, Tunisia
Abderrahmen Aloulou

Graduate School of Business, Economic and Management Laboratory (LEG), University of Sfax, Sfax, Tunisia

Download PDF

Sections

Plain Text BibTeX RIS

APA Style

Hayet Soltani, Mouna Boujelbene Abbes, Abderrahmen Aloulou. (2021). Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance. International Journal of Finance and Banking Research, 7(5), 111-122. https://doi.org/10.11648/j.ijfbr.20210705.12

Copy | Download

ACS Style

Hayet Soltani; Mouna Boujelbene Abbes; Abderrahmen Aloulou. Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance. Int. J. Finance Bank. Res. 2021, 7(5), 111-122. doi: 10.11648/j.ijfbr.20210705.12

Copy | Download

AMA Style

Hayet Soltani, Mouna Boujelbene Abbes, Abderrahmen Aloulou. Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance. Int J Finance Bank Res. 2021;7(5):111-122. doi: 10.11648/j.ijfbr.20210705.12

Copy | Download

@article{10.11648/j.ijfbr.20210705.12,
  author = {Hayet Soltani and Mouna Boujelbene Abbes and Abderrahmen Aloulou},
  title = {Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance},
  journal = {International Journal of Finance and Banking Research},
  volume = {7},
  number = {5},
  pages = {111-122},
  doi = {10.11648/j.ijfbr.20210705.12},
  url = {https://doi.org/10.11648/j.ijfbr.20210705.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20210705.12},
  abstract = {This article assesses the effect of financial stress caused by the great depression, 2008–2009, Oil crises of 2014–2015 accompanied by the sharp fall in the oil prices and the Arab Spring on the co-movements and volatility spillovers of aggregated Financial Stress Indices for eleven MENA countries. It is reveals that the extreme values of the FSIs are generally connected with well-known past financial stress episodes. We also found, for MENA Ex GCC countries, a weak interconnection between these countries while the GCC countries are more connected. Using a Vector auto-regression (VAR) estimation framework, we showed that the performance of the stock indices depends positively on its past and also, the stress index positively depends on his past delayed either by one or two periods. While, the study of impulse response functions shows that a positive shock on the financial stress index translates into a negative effect on stock market performance during the first year. This effect then disappears in slow motion before finding its long-term level.},
 year = {2021}
}

Copy | Download

TY  - JOUR
T1  - Investigating the Relationship Between Financial Stress Index and MENA Stock Markets Performance
AU  - Hayet Soltani
AU  - Mouna Boujelbene Abbes
AU  - Abderrahmen Aloulou
Y1  - 2021/09/27
PY  - 2021
N1  - https://doi.org/10.11648/j.ijfbr.20210705.12
DO  - 10.11648/j.ijfbr.20210705.12
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 111
EP  - 122
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20210705.12
AB  - This article assesses the effect of financial stress caused by the great depression, 2008–2009, Oil crises of 2014–2015 accompanied by the sharp fall in the oil prices and the Arab Spring on the co-movements and volatility spillovers of aggregated Financial Stress Indices for eleven MENA countries. It is reveals that the extreme values of the FSIs are generally connected with well-known past financial stress episodes. We also found, for MENA Ex GCC countries, a weak interconnection between these countries while the GCC countries are more connected. Using a Vector auto-regression (VAR) estimation framework, we showed that the performance of the stock indices depends positively on its past and also, the stress index positively depends on his past delayed either by one or two periods. While, the study of impulse response functions shows that a positive shock on the financial stress index translates into a negative effect on stock market performance during the first year. This effect then disappears in slow motion before finding its long-term level.
VL  - 7
IS  - 5
ER  -

Copy | Download