Return and volatility transmission between world oil prices and stock markets of the GCC countries |
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| Authors: | Mohamed El Hedi Arouri |
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| Institution: | a EDHEC Business School, 12 bis Rue de la Victoire, 75008 Paris, Franceb LEO, University of Orléans and ESC Rennes Business School, Rue de Blois - BP 6739, 45067 Orléans Cedex 2, Francec ISC Paris School of Management, 22, Boulevard du Fort de Vaux, 75017 Paris, France |
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| Abstract: | This paper investigates the return links and volatility transmission between oil and stock markets in the Gulf Cooperation Council (GCC) countries over the period 2005-2010. We employ a recent generalized VAR-GARCH approach which allows for transmissions in return and volatility. In addition, we analyze the optimal weights and hedge ratios for oil-stock portfolio holdings. On the whole, our results point to the existence of substantial return and volatility spillovers between world oil prices and GCC stock markets, and appear to be crucial for international portfolio management in the presence of oil price risk. |
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| Keywords: | Oil prices GCC stock markets Optimal portfolio designs Hedge ratios VAR-GARCH models |
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