Abstract
This study aims to document the impact of oil price variations on generating stock returns in Gulf Cooperation Council (GCC) markets during the COVID-19 era. It documents the pandemic era results from January 2020 to October 2022 by employing cointegration, Granger causality, and time-varying coefficient-vector autoregression techniques on daily data. The findings suggest two-way causality between all stock indices and the oil market. Time-dependent relationships were observed during the review period. The findings (based on regression and variance decomposition) indicate that although the reliance of the GCC stock markets was not on oil alone, oil had a significant impact during the study period. It is recommended that investors not consider diversifying portfolios in GCC stocks and oil markets to optimize benefits. The findings are expected to enhance the understanding of academics, market players, regulators, and investors regarding relationships among GCC stocks and oil markets. This study contributes to the literature by documenting the impact of the oil market on stocks during an abnormal period of the COVID-19 pandemic, considering time-varying parameters in a net oil exporting region.
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