Oil Prices and Stock Markets: What Drives what in the Gulf Corporation Council Countries?
AbstractIn the empirical literature, only few studies have focused on the relationship between oil prices and stock markets in net oil-importing countries. In net oil-exporting countries this relationship has not been widely researched. This paper implements the panel-data approach of Kónya (2006), which is based on SUR systems and Wald tests with country-specific bootstrap critical values to study the sensitivity of stock markets to oil prices in GCC (Gulf Corporation Council) countries. Using two different (weekly and monthly) datasets covering respectively the periods from 7 June 2005 to 21 October 2008, and from January 1996 to December 2007, we show strong statistical evidence that the causal relationship is consistently bi-directional for Saudi Arabia. Stock market price changes in the other GCC member countries do not Granger cause oil price changes, whereas oil price shocks Granger cause stock price changes. Therefore, investors in GCC stock markets should look at the changes in oil prices, whereas investors in oil markets should look at changes in the Saudi stock market.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2934.
Date of creation: 2010
Date of revision:
GCC stock markets; oil prices;
Other versions of this item:
- Mohamed Arouri & Christophe Rault, 2010. "Oil Prices and Stock Markets: What Drives What in the Gulf Corporation Council Countries," Economie Internationale, CEPII research center, issue 122, pages 41-56.
- Christophe Rault & ohamed El Hedi AROURI, 2009. "Oil prices and stock markets: what drives what in the Gulf Corporation Council countries?," William Davidson Institute Working Papers Series wp960, William Davidson Institute at the University of Michigan.
- F30 - International Economics - - International Finance - - - General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
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