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|b This research empirically investigates the relationship between foreign ownership and how it affects volatility at the Egyptian stock market based on data collected by researcher on foreign ownership in EGX and Market return for the period from 2005 to 2014. The study contributes to the current discussion on volatility, how it affects stock market efficiency and factors increasing volatility through modeling volatility. Recently, investment has become one of the desirable specifications for business people, especially for the area of stock market. As a result, stock market has become a main source for investing money and a purpose for those who want to make fortunes. Egyptian stock market is an important emerging stock market in the Middle East where Bloomberg has ranked it as one of the best emerging markets. In 2014, its market capitalization reached about 523,270,639,105 L.E according to EGX. In addition, it accounted for 24% of Egyptian GDP according to Oxford Business Group Report on Egypt in 2013. Foreign investing at EGX accounted for 8.1% for Arabs and 12.8% for Non-Arabs based on trading volume in 2014 (EGX.COM). Furthermore, it is necessary to investigate how foreign ownership affects the market positively or negatively, especially after various unstable conditions, which faced Egypt during the last five years from 2010 until now. Volatility is one of the most efficient indicators of variation and risk. So, the researcher studied how volatility has been affected by entry of foreigners during the last 10 years in order to explore how the overall market has been affected. The research examines the relationship between foreign ownership and stock return volatility through hypothesizing that there is a positive relationship between the independent variable “foreign ownership”(which is divided into eight sub-independent variables) and the dependent variable“ stock return volatility”. Autoregressive Distributed Lagged Model is used to measure data accuracy through applying Unit Root Analysis. The main findings are as following: first, the study found that the eight sub-hypotheses of foreign ownership have positive influence on stock return volatility at EGX during the period from 2005 to 2014. Second, results show that the main hypotheses of foreign ownership have positive influence on stock return volatility. The researcher formulates research problem as follows: Foreign ownership is one of the main indicators for market success as it reflects how political, financial and economical movements affect the market. Therefore, the researcher carries out this study in order to examine the relationship between Foreign Ownership and Stock Return volatility within the Egyptian stock market and accordingly interpret this integrated influence. Two types of hypotheses are examined, a main hypotheses and sub-hypotheses, as foreign ownership at EGX is classified into eight types as following: Arab –Institutions- Buy (AIB) , Arab –Institutions-Sell (AIS) , Arab –Individuals- Buy (APB), Arab –Individuals- Sell (APS), Non-Arab –Institutions- Buy (FIB), Non-Arab –Institutions- Sell (FIS), Non-Arab – Individuals – Buy (FPB), and Non-Arab – Individuals – Sell (FPS). Research analysis is based on daily bases in EGX, which is rarely studied through using Autoregressive Distributed Lagged Model introduced by Adkins, 2011. Research findings in the Egyptian stock exchange provide evidence using research model that there is a positive relationship between stock return volatility and foreign ownership sub-variables. According to the Model, there are eight relationships using eight models; first model measures the relationship between AIB and stock return volatility; second model measures the relationship between AIS and SRV; third model measures the relationship between APB and SR; forth model measures the relationship between APS and SRV; fifth model measures the relationship between FIB and SRV; sixth model measures the relationship between FIS and SRV; seventh model measures the relationship between FPB and SRV and, finally, eighth model measures the relationship between FPS and SRV. Research concluded that all models have coefficient of determination r2, which is more than 50% as following. For first model, r2is 69.6% and random error 30.4%. For second model; r2 is 64.74% and random error 35.26%. For third model; r2 is 57.47% and random error is 42.53%. For forth model; r2 is 62.01% and random error 37.99%. For fifth model; r2 64.49% and random error 35.51%. For sixth model; r2 is 60.95% and random error 39.05%. Finally, for seventh model; r2 is 55.04% and random error is 40.85%. The p-value for f-test to test the goodness of the whole model (f-statistics) is less than significance level (α =. 05), so that the whole model can be acceptable and the empirical results can be applied. The research has two main contributions; first, it proves that there are positive and significant relationships between foreign ownership sub-variables and stock return volatility and this proves that there is a positive and significant relationship between the main variable “foreign ownership” and stock return volatility at EGX.
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