The Impact of Oil Prices on Stocks Markets: New Evidence During and After the Arab Spring in Gulf Cooperation Council Economies

Abstract

This study investigates the impact of stock price fluctuations on stock markets in six countries in Gulf Cooperation Council (GCC) (Saudi Arabia, Kuwait, Oman, Bahrain, United Arab Emirates (UAE) and Qatar) during and after the recent geopolitics conflicts, known as Arab Spring, from January 2011 to December 2017. Two statistical models were implemented to measure the relationship between oil price fluctuations and stock markets returns. The logistic smooth transition model was implemented to measure the relationship between oil price direction (positive/negative) and stock markets returns. The exponential smooth transition model (ESTR) was applied to capture the relationship between the magnitude of oil price fluctuations (small/large) and stock markets returns. The results reveal several asymmetrical results of oil price directions (positive/negative) on stock markets returns in some GCC countries. In Saudi Arabia, Kuwait and Bahrain, the negative oil price fluctuations have larger impact on the returns of stocks markets than positive oil price fluctuations. The results reveal also that the existence of political instability increases the sensitivity of stock markets returns on negative oil price shocks. In addition, the results of ESTR model do not reveal any asymmetrical relationship between the magnitude of oil price changes and stock markets returns in GCC region except Oman. A high level of oil price shocks has larger impact on Omani stock market returns than small oil price shocks.

Time varying intra/inter quantile developing relationship of Islamic stock returns: empirical evidence from Indonesia using QBARDL

“…The results demonstrate that the enormous magnitude of the oil price fluctuations significantly impact the stock market returns in all countries but not in UAE. Interestingly, El-Chaarani (2019) confirms contribution of political instability to the sensitivity of stock market returns.…”

“…El-Chaarani (2019) observes effect of the oil price fluctuations on the stock market returns in six countries, namely, Bahrain, Saudi Arabia, Kuwait, Oman, United Arab Emirates (UAE) and Qatar from January 2011 to December 2017. His study includes a political instability variable to analyze the magnitude of the oil price fluctuation.…”

“…Narayan et al (2014) and El-Chaarani (2019) examine whether the economic growth is predicted by the oil prices in various countries including Indonesia. Their studies reveal inconsistent results between the out-of-sample and in-sample data that reflects that there are many possibilities of how oil prices influence economic growth.…”

Petroleum Economics in Canadian after World War II

“…Since the revelation of oil unexpectedly, it very well may be named will come. The oil market has passed a few phases since the revelation of oil and can be put together by time spans (El, 2019).…”

The effect of COVID-19 on Qatar and Italy stock exchanges

“…Studies on Gulf Cooperation Council (GCC) financial markets are important for three main reasons: First, most studies focused on the United States, Canada, Asia, and China where no clear studies were applied to track the effect of Covid-19 on GCC countries. Second, GCC countries are known for their special economic structure that is directly linked to the price of oil because they present the main source of the revenues of the countries, where the oil market was one of the most affected markets by the restrictions applied on imports and exports (El-Chaarani, 2019;Bahrini & Filfilan, 2020). Third, the GCC stock markets have different characteristics compared to other stock markets.…”