Global and regional volatility spillovers to GCC stock markets

Abstract

This paper examines the effects of return spillovers from regional (Saudi Arabia) and global (US) markets to GCC stock markets (Bahrain, Oman, Kuwait, Qatar, United Arab Emirates). The paper develops various bivariate GARCH models for regional and global returns: BEKK, constant correlation and dynamic correlation. The specification tests are used to choose between the models with and without asymmetric effects. The estimated innovations for the regional and global returns are then used as input for the univariate volatility spillover model which allows the unexpected returns of any particular GCC stock market be driven by three sources of shocks: local, regional from Saudi Arabia and global from US. We find significant return spillover effects from Saudi Arabia and US to GCC markets. Trade, turnover and institutional quality has significant impacts on regional volatility spillovers from Saudi Arabia to GCC markets. There are macroeconomic policy implications associated with the strengthening of intra-regional and cross-border trade in goods, services and assets and regulatory framework.

Volatility spillovers under difference in the degree of market integration: Evidence from the selected Asian and Eastern European stock markets

“…It states that volatility spillover and contagion risk could occur among stock markets which have interrelation each other. Alotaibi and Mishra (2015) confirm that as the progress of emerging markets to become increasingly integrated with global market, their response to the volatility spillovers of stock markets increases, their portfolio diversification ability decreases and they become more vulnerable to external shocks.…”

Dynamic spillovers between Nigerian, South African and international equity markets

“…That is implies that the impact of mature markets on the BRIC stock markets though present, fizzles out over time. Alotaibi and Mishra (2015) analyse the extent to which volatility spills over from the Saudi and US stock markets using a bivariate GARCH(1,1) models such as constant correlation, dynamic correlation and BEKK. The study revealed significant return spillover effects from Saudi Arabia and US to GCC markets.…”

Analyzing the Spillover Effects from Parental Markets to Cross-listed IPOs on Mean returns and Price Volatility

“…Various techniques have been used to test the mean and volatility spillover effects from market to market such as GARCH and EGARCH model (Ke, Wang, & Murray, 2010;Narula, 2016;Panda & Deo, 2014), VAR-ABEKK and VAR-DCC-AGARCH (Singh & Singh, 2017), GARCH-BEKK Model (Alotaibi & Mishra, 2015;Caporale, Pittis, & Spagnolo, 2006;Joshi, 2011), GARCH (Abou-Zaid, 2011; Dedi & Yavas, 2016;Moon & Yu, 2010), random walk test (Wagner & Szimayer, 2004) and co-integration and granger causality (Patel, 2016;Singh & Singh, 2017).…”