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Multifractal analysis of GCC banking stock efficiency dynamics: impact of financial stress, economic policy uncertainty, and geopolitical factors

Author

Listed:
  • Mabruk Billah

    (Prince Mohammad Bin Fahd University)

  • Mohammad Enamul Hoque

    (BRAC University
    Universitas Negeri Padang)

  • Ghadeer Kayal

    (Prince Mohammad bin Fahd University)

Abstract

This study investigates the informational efficiency dynamics and multifractal features of key banking sector stocks in six Gulf Cooperation Council (GCC) nations from 2005 to 2023 by constructing unique banking sector indices for each GCC country. To capture informational efficiency behavior throughout the Global Financial Crisis (GFC), Oil Price Shock, COVID-19 pandemic, and the ongoing Russia-Ukraine war, this study employs the seasonal-trend decomposition process (STL) and multifractal detrended fluctuation analysis (MF-DFA). The study also explores the influence of several categorical financial stresses, Economic Policy Uncertainty (EPU), and geopolitical factors on efficiency over time. The empirical results reveal that seasonal forces, such as reporting periods, holidays, and oil market news, systematically influenced bank stock returns across GCC nations. The GCC country indices exhibited a consistent trajectory with no significant fluctuations in trends. Additionally, multifractality/long-range correlations were present across GCC markets, indicating clustered rather than stable volatility. Specifically, Kuwait, Oman, Qatar, and Saudi Arabia displayed anti-persistent behavior, while UAE and Bahrain trended persistently. Oman demonstrated higher informational efficiency than Bahrain. Banking sectors in Saudi Arabia, Kuwait, Qatar, and United Arab Emirates (UAE) exhibited mid-level efficiency compared to Bahrain and Oman. The findings also demonstrated variability in banking sector efficiency behavior during crises such as the GFC, oil shock, and COVID-19, with Qatar and UAE exhibiting greater resilience than others. Individual bank efficiencies in GCC countries similarly fluctuated with economic and geopolitical shocks. Empirically, banking stock efficiency related more to global financial stress factors than to economic policy uncertainty or geopolitical risks alone.

Suggested Citation

  • Mabruk Billah & Mohammad Enamul Hoque & Ghadeer Kayal, 2025. "Multifractal analysis of GCC banking stock efficiency dynamics: impact of financial stress, economic policy uncertainty, and geopolitical factors," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 15(3), pages 641-686, September.
    • Handle: RePEc:spr:eurase:v:15:y:2025:i:3:d:10.1007_s40822-025-00319-w
    DOI: 10.1007/s40822-025-00319-w
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