Abstract
This paper examines the impact of political uncertainty (caused by the civil uprisings in the Arab World i.e., “Arab Spring”) on the volatility of returns for 8 Islamic banks and 11 conventional banks in the Golf Countries (GCC).By distinguishing between Islamic and conventional banks, we find that these two groups of banks react heterogeneously to the recent political turmoil. Our main finding is as follows. We document a significant small increase in the volatility of Islamic and conventional banks during the period of political unrests. Such difference is confirmed by further analysis in a various GARCH models. In general, the findings are important for the understanding of the role of the Arab spring on the financial stability of Islamic banks (IBs) and conventional banks (CBs), suggesting that they are of great significance to investors.
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