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Journal of Economic Integration 2014 March;29(1) :1-19.
Israeli-Hezbollah War and Global Financial Crisis in the Middle East and North African Equity Markets
Elie I Bouri 
Holy Spirit University of Kaslik, Jounieh, Lebanon
Corresponding Author: Elie I Bouri ,Tel: +9619600800, Fax: +96196008001, Email:
Copyright ©2014 Journal of Economic Integration
This paper, which relies on a dynamic conditional correlation model covering eight years of daily data for twelve equity markets in the Middle East and North Africa, examines the dynamic behaviour of equity returns and the response to international and regional stress periods. We assess whether the Israeli-Hezbollah war and the global financial crisis have accentuated equity linkages and find strong evidence that, although war and financial crisis shocks caused harmful consequences in most MENA markets, there were significant benefits of regional diversification during stress periods in some MENA markets. Low equity correlations across several markets are driven by both the war and the global financial crisis, implying that there still appear to be benefits from regional diversification, especially in the times of stress when it is most needed. Our empirical results are useful for asset managers seeking to construct portfolios that can better resist adverse market conditions.

JEL Classification
F30: General
G01: Financial Crises
Keywords: Stress Periods | Dynamic Conditional Correlation | MENA Equity Markets
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