Oil prices and stock markets: what drives what in the Gulf Corporation Council countries?

Christophe Rault and Mohamed Arouri

No wp960, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: In 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.

Keywords: GCC stock markets; oil prices (search for similar items in EconPapers)
JEL-codes: F3 G12 Q43 (search for similar items in EconPapers)
Pages: pages
Date: 2009-06-01
New Economics Papers: this item is included in nep-ara and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Working Paper: Oil Prices and Stock Markets: What Drives What in the Gulf Corporation Council Countries? (2011)
Journal Article: Oil Prices and Stock Markets: What Drives What in the Gulf Corporation Council Countries (2010)
Working Paper: Oil Prices and Stock Markets: What Drives what in the Gulf Corporation Council Countries? (2010)
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