Stock returns and oil price fluctuations: short and long-run analysis in the GCC context

Abstract

This article investigates the existence of short- and long-term relationships between oil prices and GCC stock markets. Since most of the GCC countries are among the major players in the world energy markets, their stock markets may be subjected to considerable influences of oil price shocks. Concerning the short-term analysis, strong positive linkages between oil price changes and stock markets have been found in Qatar, Saudi Arabia and UAE. More interestingly, our results indicate that when causality exists, it generally runs from oil prices to stock markets. The long-term analysis provides no evidence of long-term link between oil prices and stock markets in the GCC countries, except for Bahrain where the relationship between oil prices and stock market is positive and oil price fluctuations drive changes in the stock market.