The Effect of Political Uprisings on the Location of Price Discovery: Evidence from Egyptian Cross-Listed Equities

In this study, we aim to determine the location of price discovery for Egyptian cross-listed stocks around the political uprising that started on January 25, 2011, and resulted in a two-month stock market closure. We measure price discovery using Gonzalo and Granger's component share and Hasbrouck's information shares and find that, for some stocks, the contribution of the foreign market in pricing cross-listed equities increases in the period directly following the reopening of the Egyptian stock market. We discuss the factors that could explain the more pronounced shifts in the location of price discovery for some companies in the post-uprising period.     

Extracting shadow exchange rates and foreign exchange premia during currency crises: an example from Egypt

We utilize high-frequency data and a novel synchronous trade-matching algorithm to show that shadow exchange rates could be estimated from price spreads between depositary receipts and their underlying local stocks using an example of the recent Egyptian currency crisis. These shadow rates reflect the local black market foreign exchange rates in addition to a foreign exchange premium, which we attribute to the cost of expatriating capital during currency and capital control periods.     

Trading Better Versus Making More: Evidence from an Emerging Market

Using transaction data from Egypt, we examined the controversy over which investor—domestic or foreign—has superior trading performance in emerging markets. We account for informational and behavioral differences across investors by classifying them by origin and type and comparing their performance in trade execution versus profitability. Domestic institutions execute trades at the best prices with the greatest advantage against foreign institutions. This advantage is reduced when foreign institutions focus on large firms and trades. Profitability analysis revealed, however, that domestic investors accrue significant losses against foreign investors, suggesting that trading better does not necessarily translate into making more money.