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AuthorAbuzayed, Bana
AuthorAl-Fayoumi, Nedal
Available date2023-01-17T06:57:07Z
Publication Date2021
Publication NameNorth American Journal of Economics and Finance
ResourceScopus
URIhttp://dx.doi.org/10.1016/j.najef.2021.101476
URIhttp://hdl.handle.net/10576/38482
AbstractIn this study, we examine oil price extreme tail risk spillover to individual Gulf Cooperation Council (GCC) stock markets and quantify this spillover's shift before and during the COVID-19 pandemic. A dynamic conditional correlation generalized autoregressive heteroscedastic (DCC- GARCH) model is employed to estimate three important measures of tail dependence risk: conditional value at risk (CoVaR), delta CoVaR (CoVaR), and marginal expected shortfall (MES). Using daily data from January 2017 until May 2020, results point to significant systemic oil risk spillover in all GCC stock markets. In particular, the effect of oil price systemic risk on GCC stock market returns was significantly larger during COVID-19 than before the pandemic. Upon splitting COVID-19 into two phases based on severity, we identify Saudi Arabia as the only GCC market to have experienced significantly higher exposure to oil risk in Phase 1. Although all GCC stock markets received greater oil systemic risk spillover in Phase 2 of COVID-19, Saudi Arabia and the United Arab Emirates appeared more vulnerable to oil extreme risk than other countries. Our empirical findings reveal that investors should carefully consider the extreme oil risk effects on GCC stock markets when designing optimal portfolio strategies, minimizing portfolio risk, and adopting dynamic diversification process. Policymakers and regulators should also enact awareness, oversight, and action plans to minimize adverse oil risk effects. 2021 Elsevier Inc.
Languageen
PublisherElsevier
SubjectCOVID-19
GCC
Oil
Stock market
Systemic risk
TitleRisk spillover from crude oil prices to GCC stock market returns: New evidence during the COVID-19 outbreak
TypeArticle
Volume Number58
dc.accessType Abstract Only


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