Shock and volatility spillovers among equity sectors of the Gulf Arab stock markets

S.M. Hammoudeh, Y. Yuan and Michael McAleer

No EI 2008-29 Revision_Date: 2009-11-26, Econometric Institute Report from Erasmus University Rotterdam, Econometric Institute

Abstract: Upon examining own volatility dependency for the three major sectors, namely Service, Industrial and Banking, in four GCC economies (Kuwait, Qatar, Saudi Arabia and UAE), the empirical findings suggest that Banking seems to be the least sensitive among the sectors to past own volatility, while Industrial is the most volatile to the onset of past shocks or news. Sector volatility spillovers show that Saudi Arabia has the least inter-sector spillovers, while tiny Qatar has the most. Saudi Arabia seems to be the most sensitive to geopolitics, while Kuwait is the least affected. The constant conditional correlations between the three sectors for all four GCC markets echo different economic advantages and varying roles in the economy. We also provide two examples using the estimates of the GCC equity sector markets for portfolio designs and hedging strategies.

New Economics Papers: this item is included in nep-cwa
Date: 2008-11-10
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Journal Article: Shock and volatility spillovers among equity sectors of the Gulf Arab stock markets (2009)
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