GCC Stock Market Research Articles

Regime-Specific Spillover Effects Between Financial Stress, GCC Stock Markets, Brent Crude Oil, and the Gold Market

Regime-Specific Spillover Effects Between Financial Stress, GCC Stock Markets, Brent Crude Oil, and the Gold Market

Connectedness between the GCC Stock Markets

Connectedness between the GCC Stock Markets

FinTech-powered integration: Navigating the static and dynamic connectedness between GCC equity markets and renewable energy cryptocurrencies

This study examines the static and dynamic connectedness between renewable energy cryptocurrencies and the GCC stock market using the TVP-VAR and DCC-GARCH approaches. Our findings indicate a significant connectedness between the GCC stock markets and energy cryptocurrencies. Moreover, the total connectedness is higher during COVID-19 than pre-COVID-19, highlighting the heightened sensitivity to extreme events within the financial system. The energy cryptocurrencies act as net receivers of return spillovers, while GCC stock markets predominantly act as net transmitters in the overall interconnectedness framework. Our findings imply that adding energy cryptocurrencies to stock portfolios can mitigate risk and optimize portfolio performance. The findings also indicate that energy cryptocurrencies offer a potential diversification avenue and can act as a hedge during periods of higher market uncertainty. The hedging ratios are low, implying the relatively low cost of hedging risks of portfolio stocks through energy cryptocurrencies. These insights provide valuable guidance for investors and policymakers regarding portfolio management, hedging, and financial markets' stability.

Volatility connectedness of GCC stock markets: how global oil price volatility drives volatility spillover in GCC stock markets?

sThe study investigated the volatility connectedness of GCC stock market return and S&P global oil index returns using Diebold and Yilmaz (2012) method. The current study has also analyzed the possible impact of oil price volatility on net volatility spillover in GCC stock market returns pre- and post-COVID-19 period. The current study results suggest that the GCC stock markets have volatility connectedness with S&P Global Oil Index returns’ volatility and across GCC stock markets. The GCC stock markets have greater volatility in their stock markets than volatility spillover from other GCC countries. Further investigation also suggests that global oil price volatility has a divergent causal impact on net spillover in GCC stock markets. Such results would enhance the understanding of GCC stock market connection, spillover, and economic channels through which GCC markets are connected.

The Influence of the COVID-19 on the GCC Stock Markets

This research paper examined the influence of the COVID-19 pandemic on the GCC stock markets indices. By employing the Event Study Methodology (ESM), the findings confirmed that all GCC stock market indices were affected negatively by the COVID-19 pandemic. The GCC stock markets interacted negatively with the early announcement of the first confirmed cases of COVID-19 in Wuhan city in China in December 2019. They were greatly affected when the World Health Organization (WHO) announced that the COVID-19 virus had become a pandemic. The cumulative average abnormal returns (CAAR) for all of the GCC stock market indices revealed that all of the GCC stock markets were negatively affected by the COVID-19 pandemic during all investigated event windows.

Extreme dependence between structural oil shocks and stock markets in GCC countries

This paper investigates how extreme oil price shocks affect the stock market returns of major oil-exporter countries (Gulf Cooperation Council [GCC] countries) at different time horizons. We contribute to the literature by examining the extreme co-movements (tail dependence) between the different sources of oil price shocks and stock market returns directly by testing the tail dependence of the joint distribution across frequencies. Our methodology incorporates the recent oil shock decomposition of Ready (2018) with a novel quantile cross-spectral dependence approach of Baruník and Kley (2019) and wavelet coherence analysis for the period of June 1, 2006 to February 28, 2020. These two approaches enable the detection of the dependence structure during extreme market conditions (bearish and bullish markets) and/or at different time horizons (frequencies). Examining the strength of co-movement between the GCC stock market returns and disaggregated oil shocks may impact the GCC-country portfolio's value at risk levels. The findings provide potential implications for portfolio investors in the GCC region, who could consider co-movement through both return quantiles dependence and time frequencies when designing their portfolios.

The Association between Audit Committee Characteristics and Earning Management: Evidence from GCC Stock Markets

The Association between Audit Committee Characteristics and Earning Management: Evidence from GCC Stock Markets

Co-movement between GCC stock markets and the US stock markets: A wavelet coherence analysis

In this article, the co-movement between GCC and US stock market returns was investigated using the wavelet coherence method. The Dynamic Conditional Correlation GARCH (DCC-GARCH) modelling is then applied on time-varying components in order to provide a point of comparison with the results extracted from wavelet analysis. The investigation was conducted on the weekly stock index prices of two USA stock markets, namely Dow Jones and S&P 500 and six GCC stock markets, namely the United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain. The data were retrieved from Thomson Reuters’s data stream and the sample duration was from 7 January 2007 to 24 June 2018. As a result, a definite co-movement between several GCC stock markets and those of the US stock markets for a long term was found. Moreover, the results also displayed signs of the significant disparity between the co-movements of the stock markets throughout the scales of time during economic decline. This phenomenon was possibly expected during the economic decline, where a significant divergence occurred as opposed to co-movement. The implications of the findings for global investors were considerable due to the indication from long-term co-movement that these investors would not be capable of gaining simultaneous profit from time and portfolio being diversified. In fact, the results showed the major difference in the opportunities for international portfolio diversification throughout these markets in terms of scale and time.

Emerging Stock Markets Reaction to COVID-19: Can Cryptocurrencies be a Safe Haven

In this study we discuss the determinants of the BRICS and GCC stock market returns during the COVID-19 outbreak. We employ the OLS regression to discern how crypto-currencies, VIX, oil, GOLD prices, and the number of COVID-19 cases and deaths, affect the Gulf and BRICS stock markets. We find that Bitcoin and Ethereum can generate benefits from portfolio diversification and hedging strategies but not from safe haven strategies for Russia, Brazil, Abu-Dhabi, Bahrain, and Qatar financial investors during the COVID-19 outbreak. Our results reveal that Gold is neither hedge nor a safe haven but is only an effective diversifier for investors during the COVID- 19 outbreak. The results indicated that among all the BRICS and GCC stock indexes, the expected volatility of the US stock market has an effect only on china and Kuwait financial markets. Finally, our results show that the growth rate of confirmed COVID-19 cases has a negative impact only on South Africa and Brazil stock market.

A GCC Stock Market Classification Model using Sentiment Analysis based on HNBCs

A GCC Stock Market Classification Model using Sentiment Analysis based on HNBCs

The impact of oil price uncertainty on GCC stock markets

This paper investigates the dynamics of the co-movement of GCC stock market returns with global oil market uncertainty, using an ARMA-DCC-EGARCH and time varying Student-t copula models. Empirical results demonstrate that oil uncertainty has significant and time varying impacts on the GCC stock returns. The GCC stock returns are found to be negatively affected by oil market uncertainty for almost the entire period under examination. More interestingly, we find that the impact of oil price uncertainty differs across GCC member states and allows for grouping. The results also show that the stock markets of Oman and Bahrain are relatively less sensitive to the oil uncertainty factor, thus offering investors and portfolio managers different investment options and portfolio diversification opportunities across GCC members.

A Statistical Analysis of Brent and OPEC Prices on GCC Stock Markets

A Statistical Analysis of Brent and OPEC Prices on GCC Stock Markets

The impact of credit rating as scoring methods on GCC market indexes

The aim of this paper is to investigate whether country credit rating changes announcement has a significant impact on GCC Stock Market Index. As per researcher knowledge, none has been done on the GCC. Using event study methods in estimation of the relationship between the credit rating agency Moody’s and GCC stock markets indexes over 11 years period between 2004 to Jun 2015. The sample of this study is relatively related to GCC stock markets indexes, it focuses on all the long-term country credit rating decisions by Moody’s and its impact on short-terms investments and stock markets. Moreover it considers the gap between long-terms and the short-terms investor singular events. The result of our paper indicate that the impact of credit rating agency Moody’s on GCC Stock Markets Indexes is insignificant and have no impact, taking into consideration the impact of 2008 financial crisis.

Oil Dependency of GCC Stock Markets: Co-integration of GCC Stock Market Indices and Oil Price

Oil dependent economies of GCC countries had passed through various cycles of boom and trough of oil price. In the aftermath of the economic recession of 2008 and oil price, the GCC countries have been pursuing plans for diversifying to non-oil revenues. The oil of 2014-16 raised the issue of stock market cointegration to oil price movement in the background of non-oil diversification.This research study analyzes long term cointegration of oil price and GCC stock indices, and also cointegration among the GCC stock indices per se in an attempt to investigate if there is any early sign of disintegration of GCC stock markets from oil price cyclicality. The study period is linked to cyclicality of oil price: the first period comprising of Jan 2006- Dec. 2011 that covers oil price cycle during economic recession of 2008, and the second period comprising of Jan 2012 –September 2016 which covers the post-economic recession oil price cycle. The null hypotheses is that oil price and stock market indices are co-integrated.Based on Johansen Cointegration test on Box Cox transformed data of oil price and seven stock market indices of GCC countries, it is found that oil price and GCC stock markets are co-integrated. Analysis using Augmented Dickey- Fuller test and Phillips –Perron test shows that data series are all I (1). This study establishes that efforts to reduce oil dependency in GCC countries is yet to result in decoupling of financial markets from oil price cyclicality. This study also establishes that GCC stock markets per se are co-integrated but factors of cointegration beyond oil price are not explored.

Growth of Stock Market in the UAE through Merger: A Comparative Study of GCC Stock Markets

In recent years, stock exchanges have increasingly been forming alliances or merging with each other. This study is carried out with the objective of finding out the benefits of having a larger single stock market in the UAE instead of the present two separate markets: Abu Dhabi Securities Exchange and Dubai Financial Market. The study covers a period of five years from 2010 to 2014. This study is based on secondary data collected from various stock exchanges in the GCC. The various stock markets in the GCC are compared against each other on the basis of volume and value of trading, market capitalization, number of shares listed and number of days traded. Then, a similar analysis is carried out with the combined ADX and DFM. It is observed that the merger of ADX and DFM brings in benefits on all these parameters. The study also shows that the merger will benefit all the stakeholders by reducing cost of operations facilitated by the large scale operations, sophisticated technology, single trading platform, one investor number, lower trading cost and earlier break-even. Moreover, through the merger the UAE will be able to attract more local and regional companies which will enhance the revenue, profitability and presence in the region.

Financial Integration Before and During the Financial Crisis of 2008: Evidence from GCC and MENA Stock Market

Financial Integration Before and During the Financial Crisis of 2008: Evidence from GCC and MENA Stock Market

Markov-Switching Time-Varying Copula Modeling of Dependence Structure between Oil and GCC Stock Markets

This paper proposes a Markov-switching copula model to examine the presence of regime change in the time-varying dependence structure between oil price changes and stock market returns in six GCC countries. The marginal distributions are assumed to follow a long-memory model while the copula parameters are supposed to evolve according to the Markov-switching process. Furthermore, we estimate the Value-at-Risk (VaR) based on the proposed approach. The empirical results provide evidence of three regime changes, representing precrisis, financial crisis and post-crisis, in the dependence structure between energy and GCC stock markets. In particular, in the pre- and post-crisis regimes, there is no dependence, while in the crisis regime, there is significant tail dependence. For OPEC countries, we find lower tail dependence whereas in non-OPEC countries, we see upper tail dependence. VaR experiments show that the Markov-switching time- varying copula model performs better than the time-varying copula model.

GCC Stock Market Financial Centre Determinants and Classification withFAM Financial Attractiveness Model

The regional financial centres role is highly studied in literature mainly after the European integration. The regional financial centres “RFC” definition, characteristics and measurement method are our main purpose in this study. This study presents FAM “Financial Attractiveness Model” model as numerical indicator for the regional attractive financial centre, taking a real case the GCC “Gulf Cooperation Council” region. The GCC economic complexities and financial systems weakness increase the importance of the regional financial centre. In this paper, we test the GCC stock market financial centre changes by applying FAM model between 2000 and 2004 as an important period in the GCC countries due to the regional economic changes. We test the sub periods from 2000 to 2002 then from 2002 to 2004 in order to see the changes in the regional financial centre and then to compare with the IMF anchor regional financial centre.

English

This paper empirically investigates the interdependence between GCC stock market and oil price by considering structural breaks in conditional volatility. The univariate and multivariate GARCH models are extended by including structural breaks which are determined endogenously by using ICSS algorithm proposed by Inclan and Tiao. Empirical results indicate that the inclusion of structural breaks in the model substantially reduces the volatility persistence and the estimated half-life of shocks. Hence, the conditional volatility of oil price and stock market are more affected by their own shocks and volatility when structural breaks are neglected. Likewise, our results are conclusive on conditional dependency between GCC stock market and oil price revealing that the volatility shifts reduce the shocks and volatility spillover effects. For the portfolio management, the empirical results show evidence of sensitivity of the optimal weight and hedge ratios to structural breaks in conditional volatility. Key words: GCC stock market, oil price, dependency, multivariate GARCH, structural breaks, ICSS algorithm, portfolio implications.

Global and regional volatility spillovers to GCC stock markets

This paper examines the effects of return spillovers from regional (Saudi Arabia) and global (US) markets to GCC stock markets (Bahrain, Oman, Kuwait, Qatar, United Arab Emirates). The paper develops various bivariate GARCH models for regional and global returns: BEKK, constant correlation and dynamic correlation. The specification tests are used to choose between the models with and without asymmetric effects. The estimated innovations for the regional and global returns are then used as input for the univariate volatility spillover model which allows the unexpected returns of any particular GCC stock market to be driven by three sources of shocks: local, regional from Saudi Arabia and global from US. We find significant return spillover effects from Saudi Arabia and US to GCC markets. Trade, turnover and institutional quality have significant impacts on regional volatility spillovers from Saudi Arabia to GCC markets. There are macroeconomic policy implications associated with the strengthening of intra-regional and cross-border trade in goods, services and assets and regulatory framework.