Economic freedom and investment efficiency in the MENA region

摘要

The purpose of this study is to investigate the effect of economic freedom level on investment efficiency; predicted by market return and volatility; using data covering the period from 1996 tell 2015 for the MENA region countries. Simple regression models and multivariate regression models were applied to test our hypothesis. The results show that the economic freedom level has a little impact on market return, and the capital market performance get better as the government regulations get highly efficient and the financial system is accessible and efficiently functioning. In the same time, the evidence points out that economic freedom decrease market returns’ volatility (risk), indicating that; if government’s regulation in banking and financial systems doesn’t assure transparency and honesty, then financial markets efficiency will be hindered, the cost of financing will increase and the completion will be limited. Keeping in mind that the two fundamental aspects of investment are risk and return; it is obvious that economic freedom enhances the risk-return investment efficiency in the MENA region.