This paper attempts to study the effects of bilateral investment treaties between countries on their stock market correlation. The study focuses on Africa and Middle East countries and how their bilateral investment treaties with other countries affect the stock market correlation of their indices. Some previous studies have ignored the effects of bilateral investment treaties on stock market correlation. Therefore, it is important to fill in this gap. The data examined are indices for Africa and Middle East countries who are involved in bilateral investment treaties with other countries to examine the effects of these bilateral investment treaties on the stock market correlation. Other macro economic variables are also examined to study their effects on stock market correlation. A fixed effect model is used to test 192 groups of African and Middle East countries with other countries having BIT and no BIT with them. The study shows that BIT has a positive effect on stock market correlation. While, it shows that openness to trade and membership of WTO have a negative impact on stock market correlation
