Oil prices, stock market returns, and volatility spillovers: evidence from Saudi Arabia

AbstractThe study evaluates the effect of economy policy uncertainty of US on gulf cooperation council (GCC) countries’ stock market returns. The GCC countries are Saudi Arabia, Qatar, UAE, Kuwait, Bahrain and Oman. Granger Causality Tests (GCT) was done primarily to evaluate if economy policy uncertainty granger cause on GCC stock market returns. The analysis established that oil prices granger cause stock market returns for Saudi Arabia, Kuwait and UAE; the same is not true on changes in economic policy uncertainty of US cause on the stock market returns. Changes in economy policy uncertainty in US granger causes on stock market returns of Bahrain. On the other hand, economy policy uncertainty in US does not cause stock market returns in Qatar, UAE, Kuwait and Saudi Arabia. Vector Autoregression (VAR) analysis establishes that economy policy uncertainty in US negatively responds to the stock market returns of the GCC countries.

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Are Kuwaiti Stock Returns Affected by Fluctuations in Oil Prices?

International Journal of Financial Research ◽

10.5430/ijfr.v11n6p1 ◽

2020 ◽

Vol 11 (6) ◽

pp. 1

Author(s):

Salem Alshihab ◽

Nayef AlShammari

Keyword(s):

Stock Market ◽

Stock Returns ◽

Oil Prices ◽

Market Returns ◽

Macroeconomic Factors ◽

Stock Market Returns ◽

Long Run ◽

Short Run ◽

The Impact ◽

Adf Test

This paper examines the impact of fluctuations in the price of oil on Kuwaiti stock market returns for the month-to-month period of 2000 to 2020. The Augmented Dickey-Fuller (ADF) test for stationarity, the error correction model (ECM), and various cointegration test techniques were used to examine the estimated model. In an oil-based economy like Kuwait, the exposure to oil prices seems to affect the performance of the country’s stock market. Our main findings related to the long run showed that the price of oil is cointegrated with stock market returns. Interestingly, our ECM examination confirmed that changes in Kuwaiti stock market returns are only affected by oil price fluctuations in the short run. Further strategies are needed to better stabilize Kuwait’s capital market. This equilibrium can be achieved by pursuing more stability in other macroeconomic factors and providing a solid legal independence for the country’s financial market.

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Impact of TED spread, bond spread, and implied volatility on stock market returns, oil prices, home prices and exchange rates

International Journal of Bonds and Derivatives ◽

10.1504/ijbd.2016.081375 ◽

2016 ◽

Vol 2 (4) ◽

pp. 329 ◽

Cited By ~ 1

Author(s):

Akash Dania ◽

D.K. Malhotra

Keyword(s):

Stock Market ◽

Exchange Rates ◽

Implied Volatility ◽

Oil Prices ◽

Market Returns ◽

Stock Market Returns ◽

Home Prices

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Dynamic Spillovers between Gulf Cooperation Council’s Stocks, VIX, Oil and Gold Volatility Indices

Journal of Risk and Financial Management ◽

10.3390/jrfm13040069 ◽

2020 ◽

Vol 13 (4) ◽

pp. 69 ◽

Cited By ~ 1

Author(s):

Abdullah Alqahtani ◽

Julien Chevallier

Keyword(s):

Saudi Arabia ◽

Stock Market ◽

Stock Returns ◽

Gulf Cooperation Council ◽

Oil Shocks ◽

Market Returns ◽

Stock Market Returns ◽

Gcc Countries ◽

Conditional Correlations ◽

Garch Modeling

This paper analyzes the conditional correlations between the stock market returns of countries that are members of the Gulf Cooperation Council (GCC). The innovative aspects of the paper consist of focusing on three volatility indices: the oil (OVX), gold (GVZ), and S&P500 (VIX) markets (considered in log-difference). We use weekly data and resort to DCC-GARCH modeling. The novelty of the paper consists in revealing that: (i) GCC stock market returns are negatively correlated with each of the volatility measures, and the correlations are stronger during crisis periods; (ii) GCC stock returns are mostly correlated with oil shocks; and (iii) Saudi Arabia and Qatar are the most responsive to all shocks among the GCC countries, while Bahrain correlates weakly to shocks in oil, gold, and VIX. The most striking results feature extra sensitivity of Saudi Arabia and Qatar in terms of volatility indices, which should be the foremost concern of policymakers and banking analysts.

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