Investigating the asymmetric impact of oil prices on GCC stock markets
Nidhaleddine Ben Cheikh (),
Sami Ben Naceur,
Oussama Kanaan and
Economic Modelling, 2021, vol. 102, issue C
This paper investigates the presence of an asymmetric relationship between oil price movements and Gulf Cooperation Council (GCC) stock markets. We propose the implementation of nonlinear vector smooth transition regression models, which offer greater flexibility when modeling potentially asymmetric reactions in equities. Contrary to conventional wisdom, our empirical results reveal that GCC stock markets do not exhibit similar sensitivities to oil price changes. We document that oil price changes have asymmetric effects on stock returns in some GCC countries but not others. More specifically, we find that four out of six GCC stock markets are more sensitive to large oil deviations than to small ones. Our results highlight the importance of economic stabilization and reform policies that can potentially reduce the sensitivity of stock returns to oil price changes, especially with regard to the existence of asymmetric behavior.
Keywords: GCC stock Markets; Oil prices; Smooth transition regression models (search for similar items in EconPapers)
JEL-codes: F3 G12 Q43 (search for similar items in EconPapers)
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Working Paper: Investigating the asymmetric impact of oil prices on GCC stock markets (2021)
Working Paper: Investigating the Asymmetric Impact of Oil Prices on GCC Stock Markets (2020)
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