Response Asymmetries in the MENA Stock Markets.

Using weekly data from January 1999 to May 2008 and simple regression and VAR analyses, this paper examines the response asymmetries of the MENA markets (Morocco, Turkey and Tunisia) to two developed markets – the US and Japan. We found evidence for the presence of response asymmetries in Morocco and Turkey markets. The evidence strongly suggests significant responses of the MENA markets to the US and Japanese markets downturns. Thus, the benefits of international portfolio diversification tend to diminish when they are needed most, that is, during market downturns. However, Tunisia is found to be an isolated market. The US market to some extent, is more important than the Japanese in influencing MENA markets.