Contents :
The purpose of this paper is to investigate whether Arab stockmarkets are characterized by excessive volatility of returns. To this end, thestudy includes, in addition to eight Arab stock markets, two emerging and threedeveloped markets. The data consists of weekly stock price indexes over theperiod extending from October 1994 to November 1998.
After a discussion of the main characteristics of the marketscovered, the paper presents the main summary statistics of the weekly returnsin these markets. Then, the issue of volatility is tackled through twodifferent measures. The first, the coefficient of variation, measures thedegree of volatility of weekly market return relatives. The overall results donot seem to indicate any distinct level of volatility of the returns in Arabmarkets as a group relative to that of the other two groups.
The second measure of volatility used in this study, the Schwert measure, isobtained from a two-step regression technique and is an estimate of theconditional standard deviation of weekly returns. The Schwert measure is usedat the group level so that it could reveal not only the potential trends involatility of returns in Arab markets but also their level of volatilityrelative to that of emerging and developed markets. The graphs show that Arabmarkets exhibit the lowest level of volatility of returns and also that theyare not affected by international financial crises. Finally, the studyaddresses the issue of volatility spillovers. The results indicate that Arabmarkets are characterized by low correlations with each other and withinternational markets.