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The Impact of Oil Price Uncertainty on Stock Returns in Gulf Countries

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  • Shabbir Ahmad

    (Effat University, Jeddah, Saudi Arabia.)

Abstract

This study analyses the relationship between the stock market returns and the oil price volatility and its changes in six Gulf countries. We use changes in oil prices as shock while realized variance is used as proxy for volatility. After estimating an appropriate Vector Auto Regressive (VAR) model, use impulse response function and the Granger causality tests for the analysis. By employing weekly data starting from Jan-2008 to Jan-2017, study concludes that oil price variations and volatility impact the stock returns in all the Gulf stock markets.

Suggested Citation

  • Shabbir Ahmad, 2019. "The Impact of Oil Price Uncertainty on Stock Returns in Gulf Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 447-452.
    • Handle: RePEc:eco:journ2:2019-06-54
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    References listed on IDEAS

    as
    1. Akoum, Ibrahim & Graham, Michael & Kivihaho, Jarno & Nikkinen, Jussi & Omran, Mohammed, 2012. "Co-movement of oil and stock prices in the GCC region: A wavelet analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(4), pages 385-394.
    2. Basher, Syed A. & Sadorsky, Perry, 2006. "Oil price risk and emerging stock markets," Global Finance Journal, Elsevier, vol. 17(2), pages 224-251, December.
    3. Ahmed Almohaimeed & Nizar Harrathi, 2013. "Volatility Transmission and Conditional Correlation between Oil prices, Stock Market and Sector Indexes: Empirics for Saudi Stock Market," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 3(4), pages 1-8.
    4. Arouri, Mohamed El Hedi & Jouini, Jamel & Nguyen, Duc Khuong, 2012. "On the impacts of oil price fluctuations on European equity markets: Volatility spillover and hedging effectiveness," Energy Economics, Elsevier, vol. 34(2), pages 611-617.
    5. Shabbir Ahmad, 2011. "The Integration of Financial Markets in GCC Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(3), pages 209-218.
    6. Mohamed El Hedi Arouri & Christophe Rault, 2012. "Oil Prices And Stock Markets In Gcc Countries: Empirical Evidence From Panel Analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 242-253, July.
    7. Awartani, Basel & Maghyereh, Aktham Issa, 2013. "Dynamic spillovers between oil and stock markets in the Gulf Cooperation Council Countries," Energy Economics, Elsevier, vol. 36(C), pages 28-42.
    8. Samih Antoine Azar & Loucine Basmajian, 2013. "Oil Prices and the Kuwaiti and the Saudi Stock Markets:The Contrast," International Journal of Economics and Financial Issues, Econjournals, vol. 3(2), pages 294-304.
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    Cited by:

    1. Haider Mahmood, 2021. "Oil Price and Industrial Growth in Saudi Arabia: Sectoral and Asymmetry Analyses," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 7-13.
    2. Tarek Tawfik Yousef Alkhateeb & Haider Mahmood, 2020. "Oil Price and Capital Formation Nexus in GCC Countries: Asymmetry Analyses," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 146-151.

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    More about this item

    Keywords

    GCC; Stock markets; Oil price shocks; Impulse response function; Granger Causality test;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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