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Intra-regional integration of the GCC stock markets: the role of market liberalization

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  • Osamah Al-Khazali
  • Ali Darrat
  • Mohsen Saad

Abstract

The study examines empirically whether, and to what extent, equity markets in the Gulf Cooperation Council (GCC) are integrated inter-regionally. According to the official Charter of the GCC, building stronger ties among financial and capital markets of member states is a chief objective of the GCC. The results for the equity markets of Saudi Arabia, Kuwait, Bahrain and Oman suggest that these markets share a common stochastic trend that binds them together over the long-run. The results from alternative tests also indicate that measures taken since 1997 to liberalize the capital markets in the Gulf region are at least partly responsible for linking the Gulf markets. At least two implications emerge from these results. First, portfolio diversifications in the context of the Gulf region should bring little or no benefits to investors with long-term horizons, although short-term gains remain a possibility. Second, further steps to liberalize capital markets in the region appear an appropriate strategy for achieving a more integrated capital markets in the Gulf.

Suggested Citation

  • Osamah Al-Khazali & Ali Darrat & Mohsen Saad, 2006. "Intra-regional integration of the GCC stock markets: the role of market liberalization," Applied Financial Economics, Taylor & Francis Journals, vol. 16(17), pages 1265-1272.
  • Handle: RePEc:taf:apfiec:v:16:y:2006:i:17:p:1265-1272
    DOI: 10.1080/09603100500426630
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    Cited by:

    1. Syed Abul, Basher & Salem, Nechi & Hui, Zhu, 2014. "Dependence patterns across Gulf Arab stock markets: a copula approach," MPRA Paper 56566, University Library of Munich, Germany.
    2. Balli, Faruk & Basher, Syed Abul & Jean Louis, Rosmy, 2013. "Sectoral equity returns and portfolio diversification opportunities across the GCC region," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 33-48.
    3. Ariss, Rima Turk & Rezvanian, Rasoul & Mehdian, Seyed M., 2011. "Calendar anomalies in the Gulf Cooperation Council stock markets," Emerging Markets Review, Elsevier, vol. 12(3), pages 293-307, September.
    4. Awartani, Basel & Maghyereh, Aktham I. & Shiab, Mohammad Al, 2013. "Directional spillovers from the U.S. and the Saudi market to equities in the Gulf Cooperation Council countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 224-242.
    5. Mohamed El Hédi Arouri & Christophe Rault, 2010. "Les effets des fluctuations du prix du pétrole sur les marchés boursiers dans les pays du Golfe," Revue économique, Presses de Sciences-Po, vol. 61(5), pages 945-959.
    6. A. Maghyereh & B. Awartani, 2012. "Return and volatility spillovers between Dubai financial market and Abu Dhabi Stock Exchange in the UAE," Applied Financial Economics, Taylor & Francis Journals, vol. 22(10), pages 837-848, May.
    7. Jamaani, Fouad & Roca, Eduardo, 2015. "Are the regional Gulf stock markets weak-form efficient as single stock markets and as a regional stock market?," Research in International Business and Finance, Elsevier, vol. 33(C), pages 221-246.
    8. repec:eco:journ2:2018-03-36 is not listed on IDEAS

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