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Financial connectedness of GCC emerging stock markets

Abstract

This paper investigates the financial interrelatedness via mean and volatility spillovers across stock markets for the Gulf Cooperation Council countries (Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the United Arab Emirates) during the period 2008–2019 utilizing both the spillover index and the multivariate DECO-GARCH model. The results suggest that the average return equicorrelation among GCC stock markets is positive, even though it is found to be very time-varying with specific periods, which impair the benefits of GCC portfolio diversification. Besides, our spillover analysis findings provide several straightforward insights into both the level and the dynamics of stock market integration in the GCC countries over the past 10 years. Our results report significant heterogeneity among GCC stock markets in the degree of spillovers over time, strengthening our understanding of the economic channels through which GCC equity markets are correlated.

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Availability of supporting data

Please contact author for data and program codes requests. Data is obtained from Bloomberg and RATS and R are used to organize data.

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Acknowledgements

The authors are grateful to the anonymous referees of the journal for their extremely useful suggestions to improve the quality of the article. Usual disclaimers apply

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The author received no financial support for the research, authorship and/or publication of this article.

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NTH conceived of the study, carried out drafting the manuscript.

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Correspondence to Ngo Thai Hung.

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Cite this article

Hung, N.T. Financial connectedness of GCC emerging stock markets. Eurasian Econ Rev (2021). https://doi.org/10.1007/s40822-021-00185-2

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Keywords

  • GCC
  • Volatility spillover
  • DECO
  • Stock markets

JEL Classification

  • C15
  • C51
  • G15