Arab Journal of Administration المجلة العربية للإدارة


This study aims to reach the effect of the Egyptian currency exchange rate liberalization and devaluation on returns and risks of stocks in the Egyptian exchange, using the event study method. The study is based on data of daily returns of a sample of 30 stocks listed in Egyptian Stock Exchange, during the period from June 2015 to May 2017. This period came after several crises in Egypt that created large fluctuations in the Egyptian pound exchange rate, resulting finally in the Central Bank’s announcement of exchange rate liberalization and devaluation of the Egyptian currency on November 3, 2016. The results showed a significant impact of the event on the returns and total risks of the stocks. First, for stock returns, the event enabled investors to achieve significant daily and cumulative positive returns, during the period starting from -10 days before the event to +30 days after the event. These results indicate that early information about the event reached the market, and it has had a significant positive impact on stock returns and investors’ wealth, which showed an inefficiency of the Egyptian exchange. Second, regarding the total risk of stocks, the event led to a significant increase in the total risk during event period. Third, for the systematic risk of stocks, the event had no significant impact on the systematic risk during event period. These results show that sudden changes in the Egyptian pound exchange rate policy have a significant impact on returns and total risk of the Egyptian stock market.