<scp>OPEC</scp>meetings, oil market volatility and herding behaviour in the Saudi Arabia stock market

Gabbori, Dina; Awartani, Basel; Maghyereh, Aktham; Virk, Nader

doi:10.1002/ijfe.1825

Cited by 17 publications

(14 citation statements)

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“…Maghyereh et al (2020) found that herding in the UAE stock markets is more pronounced during market declines and high volatility regimes. Finally, Gabbori et al (2021) found significant herding behaviour in the Saudi market around OPEC meeting days.…”

Section: Literature Reviewmentioning

confidence: 88%

“…However, this is true only in lowvolatility regimes and herding is still significant despite speculation in energy markets when equity volatility is high. Youssef and Mokni (2018), Ulussever and Demirer (2017), Demir and Solakoglu (2016), Chaffai and Medhioub (2018), Maghyereh et al (2020), andGabbori et al (2021) focused on the herding behavior of GCC countries. Youssef and Mokni (2018) found that herding has a positive influence on associations among financial markets in the region.…”

Section: Literature Reviewmentioning

confidence: 99%

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Are herding transmissions in the gulf cooperation council stock markets regional or international?

Gabbori

Awartani

Maghyereh

et al. 2021

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PurposeThe authors aim to assess whether herding in GCC stock markets is more responsive to global dynamics than its response to regional developments. To do so, they use the largest equity market in the region which is Saudi Arabia as the benchmark, and then they examine if herding crosses from this large regional market to the rest of equities in the neighboring markets during various time periods. To compare the importance of global influences on herding, the authors investigate and compare the impact of the information flow from the US equity market on the herding of equities in the GCC markets.Design/methodology/approachTo investigate herding in GCC markets the authors use the relationship between the squared market return and the cross-section absolute deviation that does not covary with market styles and/or fundamentals. In order to do that we follow Galariotis et al. (2015) and account for four styles: market-oriented, small-cap, value and momentum. As these factors have been shown to be associated with the economic fundamentals, filtering the covariance of deviation with these factors is expected to remove the style and the fundamental herding influence from the value of the dispersion.FindingsThe results show significant herding behavior that persists across various independent periods. This evidence stands even when the authors control for the well- known factor structures in stock returns. Importantly, the authors find that the few herding crossovers that occurred during the sample period are more likely to originate from the Saudi market rather than from the US. Therefore, the authors conclude that behavioral inefficiencies in the GCC equity markets are likely to be regional and that the sentiment-based trading in the US has essentially a minimal role to play.Practical implicationsThe empirical findings are useful for policymakers who aim at preventing market manipulation in order to preserve the integrity of financial markets. Policymakers in the GCC should disclose more information to aid investors so they do not rely on other investors' trades. The portfolio managers should be aware that the correlation of GCC equities can be higher in the short term due to common market herding in these countries. As the US market does not play an important role in triggering behavioral irrationalities in these markets, investing in GCC equities is a good hedge in a US portfolio. Finally, the results have also important implications for active funds that aim to exploit short-term trending in markets in order to enhance performance.Originality/valueThe authors’ contribution in this paper is to investigate herding in GCC markets by using the relationship between the squared market return and the cross-section absolute deviation that does not covary with market styles and/or fundamentals. Another contribution of our paper is to investigate any cross herding from the Saudi market to the rest of the markets in the area. The previous literature on GCC equity market herding is silent on this issue and it is typically restricted to the level of the single market.

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Section: Literature Reviewmentioning

confidence: 88%

Section: Literature Reviewmentioning

confidence: 99%

Are herding transmissions in the gulf cooperation council stock markets regional or international?

Gabbori

Awartani

Maghyereh

et al. 2021

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“…Several studies explore herding in various markets, including equities (Hwang and Salmon, 2004;Demirer and Kutan, 2006;Tan et al, 2008;Choi and Sias, 2009;Chang, 2010;Yao et al, 2014;Galariotis et al, 2015;Clements et al, 2017;Vo and Phan, 2019;Gabbori et al, 2020;Munkh-Ulzii et al, 2020;Alhaj-Yaseen and Rao, 2019), bonds (Galariotis et al, 2016;Cai et al, 2019), commodities (Babalos and Stavroyiannis, 2015;Kumar et al, 2020;J unior et al, 2020;Youssef, 2020), real estate , mutual funds (Wermers, 1999;Walter and Moritz, 2006;D'Arcangelis and Rotundo, 2019) and cryptocurrency (Bouri et al, 2019;Ballis and Drakos, 2020; under various conditions and during crisis periods. However, fewer studies examine herding behaviour in Islamic markets.…”

Section: Introductionmentioning

confidence: 99%

“…The Gulf countries rely heavily on oil revenue as their main source of income, making them particularly vulnerable to external shocks, which could threaten their financial stability (Al-Maadid et al, 2020), and the GCC markets are strongly linked with movements of the oil prices and oilrelated news (Mohanty et al, 2011;Alqahtani et al, 2019;Cheikh et al, 2021). Gabbori et al (2020) find herding around OPEC meetings days. Ulussever and Demirer (2017) find that oil prices significantly influence herding in Gulf equity markets.…”

Section: Introductionmentioning

confidence: 99%

Herding behaviour in the Islamic bank market: evidence from the Gulf region

Yousaf

Alokla

2022

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PurposeThis study examines herding in Islamic bank equity markets under various market conditions (up/down, high/low trading and high/low volatility) and during events such as Organization of the Petroleum Exporting Countries (OPEC) meeting days, Ramadan, the Gulf Cooperation Council (GCC) crisis of 2017 and the COVID-19 pandemic. The authors also look at the impact of rising and falling oil prices on herding behaviour.Design/methodology/approachThis study uses the model of Chang et al. (2000) to estimate herding behaviour in the Islamic bank markets.FindingsFirst, the authors estimate herding at the GCC region level, and the results reveal an absence of herding under all market conditions and during all the events considered, except for the GCC crisis of 2017. Second, the authors investigate herding in four Gulf countries (Saudi Arabia, United Arab Emirates [UAE], Qatar and Kuwait) separately and find that herding is evident in all these countries during various market conditions. During Ramadan, herding appears in the Saudi Arabia and Kuwait Islamic bank equity markets. Herding is not prevalent during OPEC meeting days in any of the markets, whereas herding is evident in Saudi Arabia, UAE and Kuwait Islamic bank equity markets during the GCC crisis of 2017 and the COVID-19 pandemic. Lastly, the rising and falling oil prices do not influence herding at either GCC region or country level.Practical implicationsFrom the practitioner's perspective, this study provides useful insights for investors in Islamic banks and policymakers, in terms of asset pricing, portfolio diversification, trading strategies and market stability.Originality/valueMany studies explore herding in the equity markets of Muslim majority countries, but not specifically in the Islamic bank market. This study fills this literature gap by comprehensively examining herding in Islamic bank equity markets under various market conditions (up/down, high/low trading and high/low volatility) and during events, such as OPEC meeting days, Ramadan, the GCC crisis of 2017 and the COVID-19 pandemic.

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“…Oil is one of the most important commodities in the world, and it is one of the most pivotal raw materials of industry (Chen, Li, Xiao, & Wen, 2020; Kilian, 2009; Peng, Wen, & Gong, 2020; Xiao, Hu, Ouyang, & Wen, 2019). As we all know, oil is not only a natural resource, but also a financial asset when trading in the futures market (see Gabbori, Awartani, Maghyereh, & Virk, 2020; Lin & Li, 2015; Tang, Xiao, Wahab, & Ma, 2020; Wang, Liu, & Wu, 2017). Therefore, it is exceedingly crucial to study the relationship between crude oil price and economic conditions or financial markets.…”

Section: Introductionmentioning

confidence: 99%

The impact of macro economy on the oil price volatility from the perspective of mixing frequency

2020

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In this paper, GARCH-MIDAS model is used to study the influence of macro economy, including the levels and volatilities of macroeconomic variables, on the price fluctuations of crude oil market during the period from 1990 to 2018.The results indicate that, for the levels of macroeconomic variables, economic growth, inflation and total export-import volume have significant negative impacts on oil fluctuations. However, exchange rate has a significant positive impact on oil volatility. And short-run interest rate does not have a significant effect on oil price volatility in most cases. In addition, the responses of oil price volatility to all five macroeconomic fluctuations are significant. More interestingly, the volatilities of economic growth and total import and export reduce oil price fluctuations during the pre-2004 period, but they increase oil price fluctuations during the post-2004 period.

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OPECmeetings, oil market volatility and herding behaviour in the Saudi Arabia stock market

Cited by 17 publications

References 52 publications

Are herding transmissions in the gulf cooperation council stock markets regional or international?

Are herding transmissions in the gulf cooperation council stock markets regional or international?

Herding behaviour in the Islamic bank market: evidence from the Gulf region

The impact of macro economy on the oil price volatility from the perspective of mixing frequency

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