nep-ara New Economics Papers
on Arab World
Issue of 2009‒05‒23
six papers chosen by
Quentin Wodon
World Bank

  1. The Investment Strategies of Sovereign Wealth Funds By Josh Lerner; Shai Bernstein; Antoinette Schoar
  2. Exchange Rate Assessment for Oil Exporters By Klaus-Stefan Enders
  3. Global Imbalances and Petrodollars By Rabah Arezki; Fuad Hasanov
  4. Challenges of international financial reporting standards (ifrs) in the islamic accounting world, case of middle eastern countries By Amged Abd El Razik
  5. Sovereign Wealth Fund Investment Patterns and Performance By William L. Megginson; Bernardo Bortolotti; Veljko Fotak; William Miracky
  6. A Coincident Indicator of the Gulf Cooperation Council (GCC) Business Cycle By Abdullah Al-Hassan

  1. By: Josh Lerner (Harvard Business School); Shai Bernstein (Harvard University); Antoinette Schoar (Harvard University)
    Abstract: This paper examines the direct private equity investment strategies across sovereign wealth funds and their relationship to the funds’ organizational structures. SWFs seem to engage in a form of trend chasing, since they are more likely to invest at home when domestic equity prices are higher, and invest abroad when foreign prices are higher. Funds see the industry P/E ratios of their home investments drop in the year after the investment, while they have a positive change in the year after their investments abroad. SWFs where politicians are involved have a much greater likelihood of investing at home than those where external managers are involved. At the same time, SWFs with external managers tend to invest in lower P/E industries, which see an increase in the P/E ratios in the year after the investment. By way of contrast, funds with politicians involved invest in higher P/E industries, which have a negative valuation change in the year after the investment.
    Keywords: General Finance, Countries & Regions, Financial Services
    JEL: G11 G15
    Date: 2009–04
  2. By: Klaus-Stefan Enders
    Abstract: While the underlying methodologies continue to be widely debated and refined, there is little consensus on how to assess the equilibrium exchange rate of economies dominated by production of finite natural resources such as the oil economies of the Middle East. In part this is due to the importance of intertemporal aspects (as the real exchange rate may affect the optimal/equitable rate of transformation of finite resource wealth into financial assets), as well as risk considerations given the relatively high volatility of commodity prices. The paper illustrates some important peculiarities of the exchange rate assessment for such natural resource producers by working through a simple two-period model that captures certain key aspects of many resource economies.
    Keywords: Exchange rate assessments , Oil exporting countries , Middle East , Cooperation Council for the Arab States of the Gulf , Oil exports , Private consumption , Private savings , Economic models ,
    Date: 2009–04–22
  3. By: Rabah Arezki; Fuad Hasanov
    Abstract: Oil exporters have run large current account surpluses. We explore oil exporters' role in our understanding and the resolution of global imbalances. Current account dynamics are estimated for oil-exporting countries and the rest of the world. We find that fiscal policy has a much stronger effect on current account of oil exporters than on current account of other countries. The current account adjustment of oil-exporting countries is also faster than that of other countries. We conclude that a change in fiscal policy of oil exporters can have significant and speedy impact on global imbalances.
    Keywords: Payments imbalances , Oil exporting countries , Oil prices , Oil revenues , Current account , Current account surpluses , Fiscal policy ,
    Date: 2009–04–23
  4. By: Amged Abd El Razik (The Bucharest Academy of Economic Studies Bucharest)
    Abstract: This paper presents the case of representing the Middle Eastern countries on the International Accounting Standards Board (IASB).
    Keywords: International financial reporting standards (IFRS), IASB, MEC
    JEL: M41 H3 F5
    Date: 2009–05
  5. By: William L. Megginson (Price College of Business); Bernardo Bortolotti (Fondazione Eni Enrico Mattei and Università di Torino); Veljko Fotak (University of Oklahoma and Fondazione Eni Enrico Mattei); William Miracky (Monitor Group)
    Abstract: This study describes the newly created Monitor-FEEM Sovereign Wealth Fund Database and discusses the investment patterns and performance of 1,216 individual investments, worth over $357 billion, made by 35 sovereign wealth funds (SWFs) between January 1986 and September 2008. Approximately half of the investments we document occur after June 2005, reflecting a recent surge of SWF activity. We document large SWF investments in listed and unlisted equity, real estate, and private equity funds, with the bulk of investments being targeted in cross-border acquisitions of sizeable but non-controlling stakes in operating companies and commercial properties. The average (median) SWF investment is a $441 million ($55 million) acquisition of a 42.3% (26.2%) stake in an unlisted company; the most active SWFs originate from Singapore or the United Arab Emirates. Almost one-third (30.9%) of the number, and over half of the value (54.6%) of SWF investments are directed toward financial firms. The vast majority of SWF investments involve privately-negotiated purchases of ownership stakes in underperforming firms. We perform event study analysis using a sample of 235 SWF acquisitions of equity stakes in publicly traded companies around the world, and document a significantly positive mean abnormal return of about 0.9% around the announcement date. However, one-year matched-firm abnormal returns of SWFs average -15.49%, suggesting equity acquisitions by SWFs are followed by deteriorating firm performance. In cross sectional analysis, we find weak evidence of benefits associated with a monitoring role of SWFs and evidence consistent with agency costs created by conflicts of interest between SWFs and minority shareholder. SWFs have collectively lost over $57billion on their holdings of listed stock investments alone through March 2009.
    Keywords: Sovereign Wealth Funds, International Financial Markets, Government Policy and Regulation
    JEL: G32 G15 G38
    Date: 2009–04
  6. By: Abdullah Al-Hassan
    Abstract: This paper constructs a coincident indicator for the Gulf Cooperation Council (GCC) area business cycle. The resulting coincident indicator provides a reliable measure of the GCC business cycle; over the last decade, the GCC coincident index and the real GDP growth have moved closely together. Since the indicator is constructed using a small number of common factors, the strong correlation between the indicator and real GDP growth points to a high degree of commonality across GCC economies. The timing and direction of movements in macroeconomic variables are characterized with respect to the coincident indicator. Finally, to obtain a meaningful economic interpretation of the latent factors, their behavior is compared to the observed economic variables.
    Keywords: Business cycles , Cooperation Council for the Arab States of the Gulf , Monetary unions , Monetary policy , Gross domestic product , Economic growth , Economic models , Cross country analysis ,
    Date: 2009–04–17

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