Oil and gold return spillover and stock market elasticity during COVID-19 pandemic: A comparative study between the stock markets of oil-exporting countries and oil-importing countries in the Middle East

Bani-Khalaf, Omar; Taşpınar, Nigar

doi:10.1016/j.resourpol.2022.102935

Cited by 15 publications

(6 citation statements)

References 27 publications

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“…A significant relationship exists between OVX and GCC, which was negative during the COVID-19 crisis (oil price failure) and positive when the Russia–Ukraine war began (oil price risen). This is consistent with the literature, which shows that crude oil prices have a significant impact on GCC stock markets (Hamdi et al , 2019; Rafiuddin et al , 2021; Ben Cheikh et al , 2022; Bani-Khalaf and Taspinar, 2022). From an investment perspective, the positive correlation between oil prices and equity prices in the GCC countries suggests that the oil and equity markets can be viewed as integrated rather than segmented markets, implying that the expected benefits of diversification within the GCC region by holding assets in both oil and equity markets are not possible.…”

Section: Resultssupporting

confidence: 93%

“…As far as we know, there is relatively little literature on global shocks transmission to GCC equity markets. For example, Hamdi et al (2019), Rafiuddin et al (2021), Ben Cheikh et al (2022) and Bani-Khalaf and Taspinar (2022) represent mixed findings on how the volatility of oil and gold affect the stability of Gulf equity markets. For Rafiuddin et al (2021), shocks in oil and gold returns do not significantly affect GCC equity markets in the long run.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Diebold and Yilmaz (2012), Baruník and Křehlík (2018), wavelet coherence method and PWC method] shows that the impact of oil shocks is larger for Qatar and Bahrain (Bani-Khalaf and Taspinar, 2022), whereas the impact of gold was larger for Kuwait, Bahrain and Saudi Arabia, and these impacts of oil and gold varied in short and long periods. In a related study by Bani-Khalaf and Taspinar (2022) shows that the impact of oil shocks is larger for Qatar and Bahrain, whereas gold has a larger impact for Kuwait, Bahrain and Saudi Arabia, and these impacts of oil and gold vary in short and long periods. These results are obtained by using data on the crisis COVID-19 and different methods (i.e.…”

Section: Literature Reviewmentioning

confidence: 99%

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Global hidden factors predicting financial distress in Gulf Arab states: a quantile–time–frequency analysis

Trabelsi

2023

JFEP

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Purpose This study aims to uncover the main predictors of financial distress in the Gulf Cooperation Council (GCC) countries using a wide range of global factors and asset classes. Design/methodology/approach This study uses novel approaches that take into account extreme events as well as the nonlinear behavior of time series over various time intervals (i.e. short, medium and long term) and during boom and bust episodes. This study primarily uses the conditional value at risk (CoVaR), the quantile multivariate causality test and the partial wavelet coherence method. The data collection period ranges from March 2014 to September 2022. Findings US T-bills and gold are the primary factors that can increase financial stability in the GCC region, according to VaRs and CoVaRs. More proof of the predictive value of the oil, gold and wheat markets, as well as geopolitical tensions, uncertainty over US policy and volatility in the oil and US equities markets, is provided by the multivariate causality test. When low extreme quantiles or cross extreme quantiles are taken into account, these results are substantial and sturdy. Lastly, after adjusting for the effect of crude oil prices, this study’s wavelet coherence results indicate diminished long-run connections between the GCC stock market and the chosen global determinants. Research limitations/implications Despite the implications of the author’s research for decision makers, there are some limitations mainly related to the selection of Morgan Stanley Capital International (MSCI) GCC ex-Saudi Arabia. Considering the economic importance of the Kingdom of Saudi Arabia (KSA) in the region, the author believes that it would be better to include this country in the data to obtain more robust results. In addition, there is evidence in the literature of the existence of heterogeneous responses to global shocks; some markets are more vulnerable than others. This is another limitation of this study, as this study considers the GCC as a bloc rather than each country individually. These limitations could open up further research opportunities. Originality/value These findings are important for investors seeking to manage their portfolios under extreme market conditions. They are also important for government policies aimed at mitigating the impact of external shocks.

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Section: Resultssupporting

confidence: 93%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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Global hidden factors predicting financial distress in Gulf Arab states: a quantile–time–frequency analysis

Trabelsi

2023

JFEP

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“…The bulk of studies in this stream of literature fall into two sub-streams according to their main research objective. Studies in the first sub-stream focus on the relationship between the stock markets in this region and oil prices or/and oil price uncertainty (Abakah et al 2023;Arouri et al 2011;Abuzayed and Al-Fayoumi 2021;Awartani and Maghyereh 2013;Bani-Khalaf and Taspinar 2022;Basher et al 2018;Bouri et al 2023;Elsayed et al 2023;Hamdi et al 2019;Mohanty et al 2011). The econometric methods used in these studies are diverse, and the conclusions they derived are detailed.…”

Section: Interdependencies Among the Mena And Gcc Regions And Other F...mentioning

confidence: 99%

The Dynamic Return and Volatility Spillovers among Size-Based Stock Portfolios in the Saudi Market and Their Portfolio Management Implications during Different Crises

Al-Nassar

2023

IJFS

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This study contributes to the ongoing debate on the size effect and size-based investment styles by investigating the return and volatility spillovers and time-varying conditional correlations among Saudi large-, mid-, and small-cap indices. To this end, we utilize the weekly returns on the MSCI Saudi large-, mid-, and small-cap indices over a long sample period, spanning several crises. The econometric approach that we use is a VAR-asymmetric BEKK-GARCH model which accounts for structural breaks. On the basis of the VAR-asymmetric BEKK-GARCH model estimation results, we calculate portfolio weights and hedge ratios, and discuss their risk management implications. The empirical results confirm the presence of unilateral return spillovers running from mid- to small-cap stocks, while multilateral volatility spillovers are documented, albeit substantially weakened when accounting for structural breaks. The time-varying conditional correlations display clear spikes around crises, which translate to higher hedge ratios, increasing the cost of hedging during turbulent times. The optimal portfolio weights suggest that investors generally overweight large caps in their portfolios during uncertain times to minimize risk without lowering expected returns. The main takeaway from our results is that passively confining fund managers to a particular size category regardless of the prevailing market conditions may lead to suboptimal performance.

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“…Innovative methodologies have been harnessed to untangle the complex linkages between crude oil prices and stock market returns amid the pandemic. For instance, Bani-Khalaf and Taspinar [26], and Lúcio and Caiado [27] have detected negative correlations between crude oil price shocks and stock market returns, positing that the drastic decline in energy demand and the subsequent oil glut have exerted downward pressure on both markets. In contrast, Benlagha and El Omari [28], and Nham [29] have observed positive associations, arguing that the resurgence in oil prices following the initial collapse has invigorated stock market performance.…”

Section: Literature Reviewmentioning

confidence: 99%

Swings in Crude Oil Valuations: Analyzing Their Bearing on China’s Stock Market Returns amid the COVID-19 Pandemic Upheaval

Teng

2023

Discrete Dynamics in Nature and Society

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The advent of the COVID-19 pandemic has markedly affected energy valuations and financial markets. As such, this article aims to scrutinize the dynamic interplay between stock market returns and crude oil prices, with a particular focus on China, factoring in the second-moment effect of volatility spillover. Employing an EGARCH process to model the leverage impact on returns’ volatility, the analysis utilizes daily data spanning from January 30, 2020, to August 30, 2022, and incorporates causality-in-mean and variance assessments. Empirical findings indicate that the QDII-LOF benchmark, representing oil prices, exerts a substantial influence on stock market returns. Nevertheless, the complete sample reveals no discernible spillover effects attributable to oil price fluctuations. These insights imply that the Chinese government’s actions should carefully weigh the ramifications of spillovers. Concurrently, investors are advised to attentively monitor the crude oil market when making portfolio allocation decisions.

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Oil and gold return spillover and stock market elasticity during COVID-19 pandemic: A comparative study between the stock markets of oil-exporting countries and oil-importing countries in the Middle East

Cited by 15 publications

References 27 publications

Global hidden factors predicting financial distress in Gulf Arab states: a quantile–time–frequency analysis

Global hidden factors predicting financial distress in Gulf Arab states: a quantile–time–frequency analysis

The Dynamic Return and Volatility Spillovers among Size-Based Stock Portfolios in the Saudi Market and Their Portfolio Management Implications during Different Crises

Swings in Crude Oil Valuations: Analyzing Their Bearing on China’s Stock Market Returns amid the COVID-19 Pandemic Upheaval

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