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On the Relationship between World Oil Prices and GCC Stock Markets

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  • Mohamed El Hedi Arouri
  • Jamel Jouini
  • Nhu Tuyen Le
  • Duc Khuong Nguyen

Abstract

We provide comprehensive evidence on the relationship between oil prices and stock markets for six GCC countries. Unlike previous contributions, a wide range of modern econometric techniques are applied in order to: i) capture both short- and long-term interactions between considered markets; ii) deal with the potential asymmetry in such interactions, and iii) control for the effects of relevant global financial variables. Empirical results show strong causal linkages in the short-run with the impact direction running usually from oil to stocks, but no long-run links based on standard cointegration analysis. Stock returns seem also to be more sensitive to negative than to positive oil shocks. Using the autoregressive distributed lags model as a robustness check for cointegration results, we find several significant cointegrating relationships between oil and stock prices.

Suggested Citation

  • Mohamed El Hedi Arouri & Jamel Jouini & Nhu Tuyen Le & Duc Khuong Nguyen, 2012. "On the Relationship between World Oil Prices and GCC Stock Markets," Journal of Quantitative Economics, The Indian Econometric Society, vol. 10(1), pages 98-120, January.
  • Handle: RePEc:jqe:jqenew:v:10:y:2012:i:1:p:98-120
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    References listed on IDEAS

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    Cited by:

    1. repec:eco:journ2:2018-03-16 is not listed on IDEAS
    2. Jouini, Jamel, 2013. "Stock markets in GCC countries and global factors: A further investigation," Economic Modelling, Elsevier, vol. 31(C), pages 80-86.
    3. repec:taf:oaefxx:v:5:y:2017:i:1:p:1286061 is not listed on IDEAS
    4. repec:eee:appene:v:228:y:2018:i:c:p:1550-1560 is not listed on IDEAS
    5. Jouini, Jamel, 2013. "Return and volatility interaction between oil prices and stock markets in Saudi Arabia," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 1124-1144.
    6. repec:spr:nathaz:v:95:y:2019:i:1:d:10.1007_s11069-018-3501-y is not listed on IDEAS
    7. Khalid M. Kisswani & Mohammad I. Elian, 2017. "Do Oil Prices Affect Kuwait Sectoral Stock Prices? Non-Linear Cointegration Evidence," Working Papers 1141, Economic Research Forum, revised 09 2003.
    8. Jouini, Jamel & Harrathi, Nizar, 2014. "Revisiting the shock and volatility transmissions among GCC stock and oil markets: A further investigation," Economic Modelling, Elsevier, vol. 38(C), pages 486-494.

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