Stochastic Dominance Based Performance Ranking and Shock Transmission between MENA Countries’ GDP Growth and Stock Market Return
Posted: 19 Nov 2015 Last revised: 12 Aug 2016
Date Written: November 19, 2015
The aim of this paper is twofold. It is first to evaluate the comparative performance of ten MENA (Middle East and North Africa) countries according to GDP growth and stock market return indicators using the non-parametric stochastic dominance approach. We will then use a multivariate vector autoregressive (VAR) model to investigate the shock transmission from the most performing country to other dominated countries. Results, over the period from June 2005 to December 2013, show that the dominance of MENA countries differs across indicators. Qatar and Morocco are respectively the most performing countries according to GDP growth and stock market return. Furthermore, the GDP growth response to Qatar GDP growth shock is statistically significant for all countries while, the stock market response to Morocco stock market shock is insignificant in Qatar, Saudi Arabia, and UAE. The response time of stock market return is also short when it is significant. Finally, this finding shows that the GDP growth dominance has the greater effect than the stock market dominance.
Keywords: GDP growth, stock market return, stochastic dominance, VAR model, shock, generalized impulse response
JEL Classification: G10, O40
Suggested Citation: Suggested Citation