Political tensions, stock market dependence and volatility spillover: Evidence from the recent intra-GCC crises

Predictability of GCC stock returns: The role of geopolitical risk and crude oil returns

“…However, the related literature mostly considers developed economies ( Choudhry, 2010 , Essaddam and Karagianis, 2014 , Laborda and Olmo, 2019 ), and to lesser extent large emerging economies such as China and India ( e.g., Balcilar et al, 2018 ; Bouras et al, 2018 ) as well as smaller emerging economies in the Asia-Pacific region such as Indonesia, Malaysia, Thailand, and Pakistan (e.g., Kannadhasan and Das, 2020 , Hoque and Zaidi, 2020 ). Fewer studies ( Mnasri and Nechi, 2016 ; Charfeddine and Al Refai, 2019 ) 1 focus on the Gulf Cooperation Council (GCC) region, which includes some of the nations that have been particularly exposed to geopolitical tension (e.g. Arab uprisings, wars).…”

“…Our analysis is related to a strand of literature that examines the economic linkages between stock markets and geopolitical risk, which mostly concentrates on large developed economies and large emerging economies ( Antonakakis et al, 2017 , Balcilar et al, 2018 , Bouras et al, 2018 , Clance et al, 2018 , Bouri et al, 2019 ). In the understudied context of GCC stock indices, our paper is closet to Charfeddine and Al Refai (2019) who apply connectedness measures among the stock returns of GCC countries and examine how the blockade on Qatar shaped the system of connectedness, and Mnasri and Nechi (2016) who take an event study approach and examine the effect of terrorist attacks on the stock market volatility of several emerging markets, including GCC markets. However, both Mnasri and Nechi (2016) and Charfeddine and Al Refai (2019) ignore stock return predictability and overlook the predictive ability of geopolitical risk comparative to crude oil for GCC stock returns.…”

“…In the understudied context of GCC stock indices, our paper is closet to Charfeddine and Al Refai (2019) who apply connectedness measures among the stock returns of GCC countries and examine how the blockade on Qatar shaped the system of connectedness, and Mnasri and Nechi (2016) who take an event study approach and examine the effect of terrorist attacks on the stock market volatility of several emerging markets, including GCC markets. However, both Mnasri and Nechi (2016) and Charfeddine and Al Refai (2019) ignore stock return predictability and overlook the predictive ability of geopolitical risk comparative to crude oil for GCC stock returns. In terms of stock return predictability based on geopolitical risk, our paper is related to that of Apergis et al (2018) who consider 23 global defence companies.…”

Does political risk matter for economic and financial risks in Venezuela?

“…As stated by the study of Barro (1991), in periods of political turbulence, entrepreneurs with a risk-averse perspective are likely to shift their investments to other countries that offer more relative safety and less risk. More recent studies by Wang (2019), Hillier and Loncan (2019) and Charfeddine and Al Refai (2019) have indicated that stock markets are adversely effected by rising political tension in both domestic markets and in the international arena.…”

The Gulf Cooperation Council states: Crystallization of the regional cooperation and alliances amid dwindling resources

“…Saudi Arabia is the largest state in the GCC in terms of economy, crude oil production, population, land size, and military (Charfeddine & Al Refai, 2019). The country is ruled by the Sunni Al Saudi family as an absolute monarchy with a strict interpretation of Islam (Sadiki, 2020).…”