Oil Prices and Stock Markets in GCC Countries: Empirical Evidence From Panel Analysis

Abstract

In this paper, we examine long‐run links between oil prices and stock markets in Gulf Cooperation Council (GCC) using recent bootstrap panel cointegration techniques and seemingly unrelated regression (SUR) methods. Since GCC countries are major world energy market players, their stock markets are likely to be susceptible to oil price. We show that there is evidence for cointegration between oil prices and stock markets in GCC countries, while the SUR results indicate that oil price increases have a positive impact on stock prices, except in Saudi Arabia. Copyright © 2011 John Wiley & Sons, Ltd.

Causality in distribution between European stock markets and commodity prices: using independence test based on the empirical copula

“…The majority of these studies examine the AsianPacific region [Cong et al 2008;Narayan, Narayan 2010;Nguyen, Bhatti 2012;Broadstock, Cao, Zhang 2012;Zhu, Li, Li 2014]. Several researchers investigate the relationship between oil prices and stock returns of the GCC (Gulf Cooperation Council) countries [Mohanty et al, 2011;Hammoudeh, Choi 2006;Arouri, Lahiani, Nguyen 2011;Arouri, Rault 2012]. Park and Ratti [2008] find that oil price shocks have a negative impact on real stock returns in the U.S. and 13 European countries.…”

A note on the interaction between stock prices and exchange rates in Middle-East economies

“…If oil is one of the inputs for production, an increase in the oil price would increase the cost of production which in turn affects the cash flow and depresses the stock prices (Arouri & Rault, 2012;Chortareas, Cipollini, & Eissa, 2011;Narayan & Narayan, 2010). Besides, Krugman (1983) articulated that an increase in the oil price would also cause the exchange rate of oil-exporting countries to appreciate via the wealth transfer effect (see also Golub, 1983).…”

Regional and global spillovers and diversification opportunities in the GCC equity sectors

“…Chiou, 2008;Middleton et al, 2008;Bekaert et al, 2009;You andDaigler, 2010, Berger et al, 2011, among others). On the other hand, fewer studies including Lagoarde-Segot and Lucey (2007), Yu and Hassan (2008), Cheng et al (2010), Mansourfar et al (2010), Arouri and Rault (2012) and Chau et al (2014) have examined the stock markets in the Middle East and North Africa (MENA) region including the GCC countries. These studies generally suggest that MENA stock markets offer significant diversification potential for global investors.…”

“…Similarly, Mansourfar et al (2010) find that the oil-producing GCC countries provide greater international diversification benefits than the non-oil producing MENA countries. More recently, Arouri and Rault (2012) argue that international diversification benefits can be achieved by allocating a part of the global portfolios to investments in the oil-exporting countries. In contrast, our study first develops a two-factor model of returns with regional and global shocks as risk factors and extends the analysis of return/risk spillovers to a regime-based context in which market regimes are identified by formal statistical testing, rather than by making prior assumptions on the regime structure.…”