TIME-VARYING INTEGRATION OF MENA STOCK MARKETS SOMAR AL-MOHAMED American University of the Middle East, Kuwait NASSER ELKANJ* American University of the Middle East, Kuwait PARTHA GANGOPADHYAY, Western Sydney University, Australia This paper examines the time-varying financial integration in the Middle East and North Africa (MENA) countries: Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia and the United Arab Emirates (UAE) in pre and post-crisis sub-periods. The paper apply Bekaert and Harvey (1995) International Capital Asset Pricing Model (ICAPM) with regime switching mechanism, including both, constant and time-varying transition probabilities. The results indicates that stock markets of Egypt, Jordan Morocco and UAE appear to be integrated to world stock market; while the stock market of Bahrain, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia and Tunisia appear to be segmented from world stock market. In general, the stock markets in MENA region exhibit a variation in their degree of integration with world stock market except for Lebanon and Qatar. Key words: Time varying financial integration, International capital asset pricing model, DCC- GARCH Introduction The developments and upgrades of emerging stock markets have led to emergence of new investment opportunities. The research in international fnance has become more concerned with potential diversifcation benefts in emerging markets. The emerging stock markets of MENA region are considered as promising investment opportunity. In the past two decades, MENA countries have gone through a period of important steps to improve economic and fnancial integration such as substantial improvement in business environment and regulatory framework, accompanied with increased economic harmonization and fnancial International Journal of Development and Confict 8(2018) 85–114 Corresponding author, Email: nasserelkanj@yahoo.com Copyright © Somar Al-Mohamed, Nasser Elkanj and Partha Gangopadhyay, Licensed under the Creative Commons Attribution-NonCommercial License 3.0