The Dynamic Linkages among Sector Indices and Analysis of Financial Market Trends: The Case of the Amman Stock Exchange from 2000-2020

Abstract

This study investigates the dynamic linkages among the financial, industrial, services, and general sector indices of the Amman Stock Exchange (ASE) from 2000-2020 using a VAR model. The analysis provides insights into the interdependence among sectors and evaluates the model's efficacy in explaining sector index variations. The results indicate significant dynamic linkages among sector indices, with the VAR model demonstrating robust explanatory power based on high R-squared values and significant F-statistics. Impulse response analysis shows varied lagged effects in the transmission of shocks between sectors. The study recommends investors consider past performance of related sectors in investment decisions, while policymakers can utilize the identified interconnections to promote a stable financial market.