Subprime crisis and volatility spillover

The subprime financial crisis has sparked our interest in identifying channels through which US crisis spread across 20 developed and emerging stock markets. Empirical results of GARCH and EGARCH estimated models show a high persistence and asymmetric effect of volatility. Estimation of an augmented GARCH model indicates that the US current crisis spilled over American, European, Asian and Arabic financial markets. Interestingly, there are significant spillovers of volatility to Asian markets from UK and Swiss. Financial markets of Japan, Korea and especially Singapore constitute a channel through which crises are transmitted across global equity return.subprime crisis; volatility persistence; asymmetric effect; volatility spillover; developed markets; emerging markets; EGARH model; augmented GARCH model; financial crisis; stock markets.

International Business and Finance

Abstract: This paper studies the effect of bank manager behavior and investor behavior on market value of Islamic and conventional banks in the Middle East and North Africa region. Firstly, our analysis denoted the positive effect of discretionary behavior of manager on both types of banks on share prices since discretionary behavior transmits to investor a positive signal of future earnings' prospects. Also, we find that the conventional bank stock prices response is very high to negative signal compared with positive signal. This result is explained by prospect theory and loss aversion bias which specified that individuals are more sensitive to losses than gains of same magnitude. In particular, we discover that the negative effect of non-discretionary behavior is much lower on Islamic bank value since investors give more confidence to Islamic bank because they are motivated by the idea that Islamic banks are safer than conventional banks. Secondly, the results show that investor sentiment affects significantly both bank market prices. Thus, both Islamic and conventional banks' market value depends similarly on manager and investor behavior. The implication of this paper is that Islamic bank concentrations reveal a positive effect on their price values because of the recently increased investments in Islamic banks. PUBLIC INTEREST STATEMENT The stock market value depends on various factors. This study investigates the effect of bank manager behavior and investor behavior on market value of Islamic and conventional banks in eight countries of the Middle East and North Africa region. The empirical findings of this paper show that the behavior of manager affects significantly the banks value. Indeed, discretionary behavior of manager transmits to investor a positive signal of future earnings' prospects. Moreover, conventional market bank value response is very high to negative signal compared with positive signal. Our results also indicate that the effect of investor sentiment on both bank market prices is also significant. Our paper highlights either an important implication that the limited number of Islamic banks presents a positive effect on Islamic market bank value