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Foreign shocks and international cost of equity destabilization. Evidence from the MENA region

Author: Guyot A.
Lagoarde-Segot T.
Neaime S.
Publication venue
Publication date: 01/01/2014
Field of study

This paper investigates whether foreign financial shocks can destabilize the cost of equity in emerging markets. After a theoretical discussion, we develop annual metrics for the international cost of equity, financial integration, spillovers and shift-contagion vulnerability in a sample of 535 Middle East and North African firms from Egypt, Tunisia, Morocco and Jordan over the 1998-2011 period. We then analyze the impact of foreign shocks on the international cost of equity, using a set of SGMM and PVAR models. Our results indicate that external shocks can increase the cost of equity in mature emerging markets. © 2014.Adelman I., 2000, Structural Change and Economic Dynamics, V11, DOI 10.1016-S0954-349X(99)00019-3; ARELLANO M, 1995, J ECONOMETRICS, V68, P29, DOI 10.1016-0304-4076(94)01642-D; Barclay R, 2010, EMERG MARK REV, V11, P49, DOI 10.1016-j.ememar.2009.11.002; Baur Dirk G, 2009, Journal of Asian Economics, V20, DOI 10.1016-j.asieco.2009.04.008; Beirne J., 2008, 08286 IMF; BIKHCHANDANI S, 1992, J POLIT ECON, V100, P992, DOI 10.1086-261849; Blundell R, 1998, J ECONOMETRICS, V87, P115, DOI 10.1016-S0304-4076(98)00009-8; Calvo GA, 2000, AM ECON REV, V90, P59, DOI 10.1257-aer.90.2.59; Calvo GA, 2000, J INT ECON, V51, P79, DOI 10.1016-S0022-1996(99)00038-0; Collins D., 2006, EMERG MARK REV, V7, P67, DOI 10.1016-j.ememar.2005.06.003; Damodaran A., 2012, EQUITY RISK PREMIUM; Edison NJ., 2003, IMF WORKING PAPERS; ERRUNZA V, 1985, J FINANC, V40, P105, DOI 10.2307-2328050; Forbes K., 2000, NBER WORKING PAPERS; Frank N., 2008, 08200 IMF; Harris RDF, 1999, J ECONOMETRICS, V91, P201, DOI 10.1016-S0304-4076(98)00076-1; Henry PB, 2000, J FINANC, V55, P529, DOI 10.1111-0022-1082.00219; Hirshleifer D, 2006, J FINANC ECON, V81, P311, DOI 10.1016-j.jfineco.2005.05.006; Kaminsky G., 2003, NBER WORKING PAPERS; Khallouli Wajih, 2012, Journal of Economic Integration, V27, P134; Kodres LE, 2002, J FINANC, V57, P769, DOI 10.1111-1540-6261.00441; Lagoarde-Segot T., 2013, RES INT BUS FINAN, V27, P183; Lagoarde-Segot T., 2010, WORLD ECON, V32, P1478; Lagoarde-Segot Thomas, 2008, J INT FINANC MARK I, V18, P94, DOI 10.1016-j.intfin.2006.06.003; Meza F, 2011, J INT ECON, V85, P317, DOI 10.1016-j.jinteco.2011.06.001; Neumann RM, 2009, INT REV ECON FINANC, V18, P488, DOI 10.1016-j.iref.2008.04.005; Patro DK, 2005, J BANK FINANC, V29, P1671, DOI 10.1016-j.jbankfin.2004.06.032; Roodman D, 2009, OXFORD B ECON STAT, V71, P135, DOI 10.1111-j.1468-0084.2008.00542.x; Sims CA, 1999, ECONOMETRICA, V67, P1113, DOI 10.1111-1468-0262.00071; Stulz R. M., 1999, J APPL CORPORATE FIN, V12, P8, DOI 10.1111-j.1745-6622.1999.tb00027.x; Windmeijer F, 2005, J ECONOMETRICS, V126, P25, DOI 10.1016-j.jeconom.2004.02.0050

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