The ripple effect: analyzing the contagion of the Tunisian revolution on the Egyptian stock market

IF 2 Q2 BUSINESS, FINANCE Journal of Financial Regulation and Compliance Pub Date : 2024-07-25 DOI:10.1108/jfrc-09-2023-0153

Zahra Meskini, Hasna Chaibi

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Abstract

Purpose

This study aims to test the contagion effect of the Tunisian revolution on the Egyptian stock market. Thus, the purpose of this research is to distinguish the contagion effect from the simple interdependence between these markets.

Design/methodology/approach

This paper examines the contagion hypothesis between Tunisia and Egypt during the Arab Spring, using a DCC-MGARCH model to capture time-varying contagion effects and dynamic linkages in stock markets. Therefore, to identify the contagion effect from the simple interdependence, the authors apply the pure contagion test developed by Forbes and Rigobon (2002).

Findings

The findings indicate a contagion effect, as the EGX 30 index exhibited similar changes, positive or negative, as the Tunindex index during the period of the Tunisian revolution. Moreover, the analysis demonstrates the presence of an interdependence between the Tunisian revolution and the Egyptian market, emphasizing the interconnections between these two economies.

Practical implications

The findings provide investors with a better understanding of financial market dynamics in times of major political unrest, notably on the Tunisian and Egyptian markets. By understanding the contagion effect of the Tunisian revolution on the Egyptian stock market, investors can further explore the complexities of these markets in times of financial crises, which can help mitigate losses and identify strategic investment opportunities.

Originality/value

This study makes two significant contributions to the field. First, it addresses the scarcity of research specifically focused on the contagion effect during the Arab Spring, aiming to fill this gap by testing the contagion effect of the Tunisian revolution on a nearby market. Second, it extends the contagion test of Forbes and Rigobon (2002), which associates “pure” contagion with a significantly higher correlation between markets during a crisis.

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涟漪效应：分析突尼斯革命对埃及股市的影响

目的本研究旨在检验突尼斯革命对埃及股市的传染效应。本文使用 DCC-MGARCH 模型来捕捉股票市场的时变传染效应和动态联系，检验了 "阿拉伯之春 "期间突尼斯和埃及之间的传染假说。因此，为了从简单的相互依存关系中识别出传染效应，作者采用了 Forbes 和 Rigobon（2002 年）开发的纯传染检验方法。研究结果研究结果表明存在传染效应，因为在突尼斯革命期间，EGX 30 指数与 Tunindex 指数表现出相似的正负变化。此外，分析表明突尼斯革命与埃及市场之间存在相互依存关系，强调了这两个经济体之间的相互联系。实际意义研究结果让投资者更好地了解重大政治动荡时期的金融市场动态，尤其是突尼斯和埃及市场的动态。通过了解突尼斯革命对埃及股市的传染效应，投资者可以进一步探索金融危机时期这些市场的复杂性，这有助于减少损失并发现战略性投资机会。首先，它解决了专门针对 "阿拉伯之春 "期间传染效应的研究稀缺的问题，旨在通过检验突尼斯革命对附近市场的传染效应来填补这一空白。其次，它扩展了 Forbes 和 Rigobon（2002 年）的传染测试，该测试将 "纯粹 "传染与危机期间市场间显著较高的相关性联系起来。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Financial Regulation and Compliance BUSINESS, FINANCE-

CiteScore

2.60

自引率

11.10%

发文量

期刊介绍： Since its inception in 1992, the Journal of Financial Regulation and Compliance has provided an authoritative and scholarly platform for international research in financial regulation and compliance. The journal is at the intersection between academic research and the practice of financial regulation, with distinguished past authors including senior regulators, central bankers and even a Prime Minister. Financial crises, predatory practices, internationalization and integration, the increased use of technology and financial innovation are just some of the changes and issues that contemporary financial regulators are grappling with. These challenges and changes hold profound implications for regulation and compliance, ranging from macro-prudential to consumer protection policies. The journal seeks to illuminate these issues, is pluralistic in approach and invites scholarly papers using any appropriate methodology. Accordingly, the journal welcomes submissions from finance, law, economics and interdisciplinary perspectives. A broad spectrum of research styles, sources of information and topics (e.g. banking laws and regulations, stock market and cross border regulation, risk assessment and management, training and competence, competition law, case law, compliance and regulatory updates and guidelines) are appropriate. All submissions are double-blind refereed and judged on academic rigour, originality, quality of exposition and relevance to policy and practice. Once accepted, individual articles are typeset, proofed and published online as the Version of Record within an average of 32 days, so that articles can be downloaded and cited earlier.