This research examines the interaction between financial services index performance and general index performance using daily returns of the Amman Stock Exchange (ASE) indices over the period from January 1, 2000 through December 31, 2009. We investigate the bidirectional causality mechanism between financial services index performance and General index performance. The results show bidirectional causality between them, but the evidence shows that general index causes financial services index at lag 2, while the financial services index causes general index at lag 4. We investigate too the Cointegration between financial services index performance and General index performance. The results show that there is a relationship between them at the long run too. This means that there is an interdependence between financial services index performance and general index performance, because the financial services sector invests a lot of cash in stocks. This inflow and outflow of cash seem to cause this dynamic interaction between the general index and the financial service index. This indicates too that there is a short run momentum in stock prices.
ISSN: 2241-0996 (Online)