Behavior Financial Theory and Analysis of Investor Behavior in the Capital Markets in Lebanon

Abstract

This paper discussed the market emergence in the Middle and East generally and Lebanon specifically. We first consider the main components of market emergence in Lebanon, including the size, depth, activity, and transparency of the market, and proceed to a descriptive analysis. Aggregating these observations into four bootstrapped indexes, we analyze the factors leading to market emergence with a probity model. We find that market size and activity seem to affect market emergence, whereas pricing and transparency do not. Finally, decomposing country-level probabilities and implementing a cluster analysis suggest that the average process of market emergence is more pronounced in the Lebanon region than it is in other emerging areas, such as Latin America and Eastern Europe. Overall, the results suggest that the Lebanon capital markets may attract more capital flows in the future. However, the markets are still heterogeneous: Whereas Turkey, Jordan, and Egypt are moving closer to the standards of developed countries, Lebanon, Tunisia, and Morocco can still be viewed as frontier markets.