Stock Market Integration in the MENA Region: An Application of the ARDL Bounds Testing Approach

This study examines financial integration among four emerging stock markets in the Middle East and North African (MENA) region. The study also examines the integration between these markets and developed markets represented by the US, UK and Germany. The study utilizes the newly proposed autoregressive distributed lag (ARDL) approach to cointegration. The results show evidence of the existence of integration among stock markets in the MENA region, but not between the MENA markets and developed markets. This provides opportunities for international investors to obtain long-run gains through portfolio diversification in the MENA region, while for regional investors, these opportunities are limited in the long run.