Go Long or Short in Pyramids? News From the Egyptian Stock Market

Abstract

Similar to other emerging economies, the Egyptian stock market has recently experienced a remarkable run-up but also a major downturn. This paper analyzes the stock market from two angles. First, it compares the performance of the major stock price index with its underlying fundamentals. Second, it explores the relationship between the Egyptian and other stock markets. The paper finds that (i) there is some evidence against a stable relationship between the Egyptian index and its fundamental value; and (ii) short-term correlations and long-term cointegrating relations provide conflicting signals on the value of Egyptian stocks as a means of diversification.Stock markets;Stock prices;stock market, cointegration, correlations, stock price, stock market indices, correlation, statistics, stock price index, stock exchanges, overvaluation, autocorrelation, standard deviation, stock index, equity markets, statistic, stock exchange, discount rate, equation, stock market capitalization, present value, descriptive statistics, stock valuation, stock market index, stock indices, stock market prices, statistical model, time series, stock market development, stock price indices, hedge, stock market developments, statistical techniques, local stock market, stock companies, financial statistics, financial markets, stationary process, stock market bubble, covariance, derivative products, financial sector, derivative, stock exchange index, foreign equity, sampling, international financial statistics, real discount rate, discount rates, discounting, asset bubbles, international finance, equity market, empirical model, polynomial, parsimonious model, hypothesis testing, real variables, financial structure