The Impact of International Reserves and Downgrading the Sovereign Credit Rating on the Egyptian Stock Market | ||
| التجارة والتمويل | ||
| Volume 45, Issue 3, September 2025, Pages 279-308 PDF (1.24 M) | ||
| DOI: 10.21608/caf.2025.455772 | ||
| Authors | ||
| Esam Aldin M. Algebaly1; Mohamed M. Rady2 | ||
| 1Faculty of Commerce, Tanta University, Egypt . | ||
| 2Higher Institute of Management and Information Technology in Kafr El-Sheikh, Egypt. | ||
| Abstract | ||
| This study aimed to investigate the impact of changes in international reserves on the volatility in the Egyptian stock market returns, and examined the asymmetric of negative and positive of international reserves shocks on the volatility of Egyptian stock market returns. To achieve these objectives, the Asymmetric BEKK GARCH model was employed using monthly data spanning from January 1998 to December 2024. The results indicate a statistically significant positive impact of changes in the international reserves and the volatility of Egyptian stock market returns. In addition, no evidence was found to support asymmetry in the impact of negative versus positive shocks on market volatility. The study also targeted the impact of Egypt’s sovereign credit rating downgrade on the daily returns of the Egyptian stock market by employing a one-sample t-test within an event study framework, and it examined whether the results differed depending on the rating agency issuing the credit rating. The results did not reveal any response in the Egyptian stock market to the announcements of the rating downgrade, nor were there any differences in the results depending on the rating agency. The robustness of the results was confirmed using several methods, such as employing the non-parametric Wilcoxon Signed Rank test instead of the parametric t-test, using alternative event windows to calculate cumulative abnormal returns, and excluding downgrade announcements issued by other rating agencies within one month from the downgrade announcement issued by a specific rating agency. The study’s findings are beneficial to investors, portfolio managers, and policy makers in the Egyptian market. Moreover, the study guides researchers for future research in several other areas related to the topic | ||
| Keywords | ||
| International reserves; sovereign credit rating (SCR); the Egyptian stock exchange; event Study; BEKK GARCH model | ||
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