Erasmus university rotterdam

Emerging market data

In this section some information about the financial markets used in this analysis will be discussed. Not much research exists about the financial markets used in this study within the context of the CAPM. Cheng et al. (2009) stated that besides investigation of Israel during the hyperinflation in the 1980s, very few researcher have studied the Middle East and North African countries. Since these financial markets are all relatively new, this does not come as a surprise. Many of the companies in these countries have done well. For instance, many companies is Israel are world leader in high-tech sectors (Cheng et al, 2009). The returns in these countries have been realized while the area experienced major political and security instability.

The Egyptian stock market (Cairo and Alexandria Stock Exchange, CASE) is the second largest in Africa. Since the 1980s the stock market started to open up the market to local and foreign investment, this led to a fast growth in participation in the stock market (Omran 2007). The Egyptian stock market is open to foreign investments, however there are a few exceptions, certain companies do not allow foreign stakeholders. According to Omran (2007) the Egyptian stock market has two major characteristics. First, the stock market is illiquid and dominated by a small number of stocks. Second, historical data is not available for long period of time. Omran (2007) states that the Egyptian stock market suffers from thin trading. The Israeli stock market (Tel Aviv Stock Exchange) is completely open to foreign investment and plays a major role in the Israeli economy. The Moroccan stock market (Casablanca Stock Exchange) is the third largest stock market in Africa. The Turkish stock market (Istanbul Stock Exchange) is completely open to foreign investment from August 1989.

Hoyer-Ellefsen (2004) composed an ‘information and market efficiency’ score by combining four trading characteristics. A value of 1 was assigned to each measure that suggested that the market would behave efficiently. The Egyptian stock market was rated most efficient with a score of 2, followed by Israel (1), Morocco and Turkey both scored 0, which indicates that these markets are not efficient.