Macroeconomic Variables and Islamic Bank Stock Returns : Panel Data Evidence from GCC Countries

Abstract

The study provides an empirical evidence of the relationship between macroeconomic variables and bank stock returns in the context of GCC countries using a panel data approach. The data for this study is retrieved from the DataStream World Bank Data archive. The data of 66 banks for the period 2005-2014 was examined using GLS estimation for the analysis. The findings revealed that there is a statistically positive relationship between macroeconomic variables and Islamic bank returns. The positive relationship implies that most banks in the GCC countries engage in numerous off-balance sheet transactions and implement efficient and effective methods of risk management, which reduces their exposure to changes in macroeconomic variables.