Co-movement between GCC stock markets and the US stock markets: A wavelet coherence analysis

Abstract

In this article, the co-movement between GCC and US stock market returns was investigated using the wavelet coherence method. The Dynamic Conditional Correlation GARCH (DCC-GARCH) modelling is then applied on timevarying components in order to provide a point of comparison with the results extracted from wavelet analysis. The investigation was conducted on the weekly stock index prices of two USA stock markets, namely Dow Jones and S&P 500 and six GCC stock markets, namely the United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain. The data were retrieved from Thomson Reuters's data stream and the sample duration was from 7 January 2007 to 24 June 2018. As a result, a definite co-movement between several GCC stock markets and those of the US stock markets for a long term was found. Moreover, the results also displayed signs of the significant disparity between the co-movements of the stock markets throughout the scales of time during economic decline. This phenomenon was possibly expected during the economic decline, where a significant divergence occurred as opposed to co-movement. The implications of the findings for global investors were considerable due to the indication from long-term co-movement that these investors would not be capable of gaining simultaneous profit from time and portfolio being diversified. In fact, the results showed the major difference in the opportunities for international portfolio diversification throughout these markets in terms of scale and time.

Spillover effects and transmission of shocks in Visegrad equity markets

“…Their findings indicate multiple connections between V4 exchanges at various frequency shocks. Similar co-movements between the US stock market and the Gulf Cooperation Council (GCC) have also been analyzed by Matar et al (2021). Their investigation uses wavelet coherence analysis to find substantial co-movements between the GCC and US stock markets at various time scales.…”

Oil Exports, Political Issues, and Stock Market Nexus

“…Besides, the developed stock markets are more sensitive to the Covid-19 pandemic than the emerging stock market (Salisu et al, 2020). Moreover, many studies' results presented evidence of interdependence and interactions among the regional or global stock market indicators (Komlavi, 2010;Patel, 2017;Meng and Huang, 2019;Jiang and Yoon, 2020;Hung, 2021;Matar et al, 2021), especially during the global economic decline (Aloui and Hkiri, 2014;Shahzad et al, 2017). Nevertheless, studies found very high fluctuation in the stock market during the Covid-19 period, even higher than the financial crisis or global recession (Shehzad et al, 2021;Alkayed et al, 2022).…”

Iraqi Stock Exchange Reactions to the Oil price, Covid-19 Aftermath, and the Saudi Stock Exchange Movements pre-during Vaccination Program

“…In the last two decades, many studies tested the availability of linkage between the developed and developing stock markets (Al-Najjar, 2022). Many studies' results presented evidence of having interdependence and interactions among the regional or global stock market indicators (Komlavi, 2010;Patel, 2017;Meng and Huang, 2019;Jiang and Yoon, 2020;Hung, 2021;Matar et al, 2021), and during the global economic decline (Aloui and Hkiri, 2014;Shahzad et al, 2017), in general, Saudi Arabia constitutes the bulk of GCC market capitalization and predominates the activities of these country markets (Bley and Chen, 2006). While some studies did not find stock market co-movement with each other (Paskelian et al, 2013), several studies' results indicated that there is no association between the developing and developed market (Fernandez, 2005).…”