Spillovers and predictability between Saudi Arabia and global financial Markets: Evidence from G20 countries

Nader Trabelsi

The North American Journal of Economics and Finance, 2023, vol. 68, issue C

Abstract: The objective of this study is to empirically answer the most frequently asked questions about spillover effects and predictability for the nexus between Saudi and other G20 stock markets. Mixed frequency quantile-based approaches are used to measure the dependence between time series. The results show considerable heterogeneity in the co-movement between contemporaneous returns, suggesting different efficiencies. This evidence is long-run and under declining market conditions. They also show great resistance to short-run spillovers, implying that there is no direct spillover channel for the Saudi and other G20 equity markets. However, the co-movement between lagged returns in the short run is more pronounced between KSA and countries that are highly dependent on oil (i.e., largest crude oil exporters or importers). These results suggest that the decision to open up the economy in 2015, along with other economic factors (hydrocarbon wealth, complex trade and financial relationships, etc.), has increased the vulnerability of the Saudi stock market to global shocks, reducing its diversification spectrum.

Keywords: Economic openness; Integration; Predictability; Contagion; Diversification (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:68:y:2023:i:c:s1062940823001225

DOI: 10.1016/j.najef.2023.101999

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