Ziadat SA & McMillan D (2022) Oil-Stock Nexus: The Role of Oil Shocks for GCC Markets. Studies in Economics and Finance. https://doi.org/10.1108/SEF-12-2021-0529
This study examines the links between oil price shocks and GCC stock markets from February 2004 to December 2019. Initial results show a positive oil price change increases stock returns, while greater volatility decreases returns. Shock decomposition results reveal a significant positive impact of supply-side shocks on stocks. This contrasts with the literature that argues demand-side shocks are more important. Our result reflects the unique economic structure of the GCC bloc, marked by its dependence on oil revenues. In analysing quantile-based results, oil supply shocks mainly exhibit lower-tail dependence, while we uncover some evidence of demand-side shocks affecting mid and upper-tail dependence. These results will be of interest to global investors and GCC policy-makers.
Energy finance; oil price shocks; emerging financial markets
Output Status: Forthcoming/Available Online
Studies in Economics and Finance