Shocks and Volatility Spillover Between Stock Markets of Developed Countries and GCC Stock Markets

Abstract

The purpose of this paper is to examine the spillover of returns, information and volatility of returns, and conditional variance-covariance between the stock markets of developed countries namely the United States of America, the United Kingdom and China (US, UK and CH) and the stock markets of Gulf Cooperation Council (GCC) countries (Kuwait, United Arab Emirates, Qatar, Saudi Arabia, Oman, and Bahrain) using daily returns spanned from 2 March 2003 to 9 December 2010. We consider shocks and volatility spillover model by applying a multivariate generalized autoregressive conditional heteroskedasticity (MGARCH) model using; MGARCH-BEKK to identify the source and magnitude of volatility and shock spillover. We get the correlation between GCC markets is positive, indicating that there is a common factor which is driving the markets towards the same direction. Evidence shows that the own-shocks and volatility in GCC markets are highly significant. Cross-information spillover effects, as another observable trend, are found between Qatar and Oman. Furthermore, the results show that UA is significantly affected by spillover (return, shocks and volatility) from developed markets, while there have been no significant effects seen from Kuwait markets. This study takes a new empirical look in the sense that the models incorporating all the countries under investigation are estimated jointly utilizing multivariate GARCH-BEKK formulation. In addition, this paper should be interesting for academicians as well as practitioners. Including those interested in modelling multivariate volatility for financial market risk management.

The Causality Relationship Among Stock Markets In Risk Situation

“…Çelik vd., (2018), Nijerya, Endonezya, Meksika, Filipinler ve Türkiye borsaları arasında volatilite yayılma etkisini VAR-EGARCH modelini kullanarak incelemişler ve NIMPT ülkeleri olarak da adlandırılan bu ülkeler arasındaki ilişkinin zayıf olduğunu tespit ederek, uluslararası yatırımcıların portföy çeşitlendirmesi yapabileceklerini belirtmişler; ayrıca incelenen borsalar arasında kaldıraç etkisinin en fazla Türkiye ve Meksika borsalarında görüldüğünü saptamışlardır. Alfreedi (2019)…”

Financial stress effects on financial markets: dynamic connectedness and portfolio hedging

“…The results evince that the degree of stock market dependency and the volatility spillover between Qatar and the other GCC countries were substantially affected only by the recent GCC crisis of June 2017. Alfreedi (2019) looks into the spillover among stock markets of developed countries. We show a positive correlation between the GCC markets, indicating that there is a common factor driving the markets in the same direction.…”

The Influence of Internet Finance on the Sustainable Development of the Financial Ecosystem in China

“…Vo and Ellis [23] employed DCC-GARCH to study stock return linkages and volatility transmission between Vietnam and advanced countries and Felipe et al The authors of [24] employed a MGARCH-BEKK, DCC, and t-copulas modelling to analyze the spillover effects and channels of volatility from and to Brazilian stock market. Moreover, the GARCH-BEKK model was used by many scholars [25][26][27][28][29][30][31][32][33] to study the volatility transmission.…”