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Oil price and Gulf Corporation Council stock indices: New evidence from time-varying copula models

Jean-Pierre Fenech and Hamed Vosgha

Economic Modelling, 2019, vol. 77, issue C, 81-91

Abstract: Using a time-varying GJR copula approach, we determine the conditional dependence of the GCC stock indices on oil price between 2007 and 2016. We show how to improve the forecasting accuracy of the co-movement of energy and stock prices in an equally weighted portfolio. Contrary to prior findings, we demonstrate that due to the different co-movements across the GCC stock indices, portfolios of oil assets and several GCC stocks are less likely to be affected by systemic risk. The different co-movements across several stock indices over time provide different entry and exit points for stock investors. This approach is in line with the ‘buy low/sell high’ adage.

Keywords: Crude oil prices; Copulas; Tail dependence; Co-movement (search for similar items in EconPapers)
JEL-codes: C1 C6 E3 G1 (search for similar items in EconPapers)
Date: 2019
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