Proceedings of 7th Annual American Business Research Conference
23 - 24 July 2015, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-79-5
Is Investors’ Fear Gauge in a Mature Market Matter?
Evidence from MENA Region
Bana Abuzayed1, Nedal Al-Fayoumi and Talah Arabiyat
This paper examines the notion that less developed markets are conceivably deemed
as “safe haven” for international investors. It tests the effect of mature markets’ fear
on risk and return in less developed markets. To address this notion further, the study
examine the effect before, amidst, and after the global financial crisis. The study
employs VAR-GARCH methodology to test for volatility spillover between the mature
market risk perception index (VIX) and 12 MENA stock markets for a period from
2001 to 2014. Results reveal weak fear spillover between MENA stock markets and
VIX index which diminish during the crisis period. Our findings are important in two
folds. First, mature markets investment managers can improve hedging strategies by
incorporating known values of the MENA markets investments and considering new
opportunities for diversifications. Second, this study brings evidence for markets
investors and policy makers alike that internal shocks rather than external volatility
perception are more important in modeling volatility in the MENA stock markets.
Key Words: MENA, Volatility, VIX, Portfolio Management, Diversification
Track: Finance
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Bana Abuzayed , Associate Professor of Banking and Finance, Qatar University, College of Business
and Economics, Department of Finance and Economics, Email: babuzayed@qu.edu.qaNedal AlFayoumi, Professor of Finance, Qatar University, College of Business and Economics, Department of
Finance and Economics, Email:Nedal.alfayoumi@qu.edu.qaTalah Arabiyat, Assistant Professor of
Economics, German Jordanian University, Talal Abu-Ghazaleh Graduate School of Business,
Email: t.arabiyat@gmail.com
1
Corresponding Author