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AuthorNedal, Al-Fayoumi
AuthorBouri, Elie
AuthorAbuzayed, Bana
Available date2024-01-21T13:27:09Z
Publication Date2023-10-31
Publication NameEnergy Economics
Identifierhttp://dx.doi.org/10.1016/j.eneco.2023.106930
CitationAl-Fayoumi, N., Bouri, E., & Abuzayed, B. (2023). Decomposed oil price shocks and GCC stock market sector returns and volatility. Energy Economics, 126, 106930.‏
ISSN01409883
URIhttps://www.sciencedirect.com/science/article/pii/S0140988323004280
URIhttp://hdl.handle.net/10576/51008
AbstractThis study investigates dynamic mean and tail-based connectedness between decomposed oil price shocks (demand shock, supply shock, and risk shock) and Gulf Cooperation Council (GCC) stock returns and volatility at the aggregate and sectoral levels of stock data. The sample period is January 13, 2012 - January 14, 2022, covering calm and turbulent periods. The results of mean-based connectedness show generally low levels of connectedness over the full sample period for both return and volatility, despite some time-variation and irregularity in the patterns of connectedness across stock sectors. Total, directional, and pairwise connectedness measures surge significantly during Phase 1 of COVID-19, highlighting the pandemic's influence on the oil shocks–GCC stocks nexus. However, Phase 2 of COVID-19 displays a gradual reduction in return and volatility connectedness, which could be attributed to fiscal stimulus and COVID19 relief packages adopted by policymakers to contain the adverse impact of the virus on the economy. Quantile-based connectedness measures reveal evidence of heterogeneity in the impacts of oil shocks across the various quantiles of stock sector returns and volatility. Unlike supply shock, demand shock is a net transmitter of spillovers, irrespective of the quantiles. Volatility connectedness is stronger at the high volatility state than the moderate and low volatility states for all sectors, but strongest for the industrials sector. The results indicate that modelling oil shocks and GCC stock sector returns and volatility should concentrate on the most influential oil shocks (e.g. demand shock) affecting the lower and upper quantiles of sector returns and upper quantiles of sector volatility, especially for the industrials. The findings have implications for improving portfolio risk management and regulatory procedures, which should be necessary to address spillover effects from decomposed oil shocks in the stock markets of oil-exporters such as GCC countries.
Languageen
PublisherElsevier B.V.
SubjectQuantile connectedness
GCC stock sectors
Decomposed oil shocks
COVID-19 outbreak
Stock return and volatility
TitleDecomposed oil price shocks and GCC stock market sector returns and volatility
TypeArticle
Volume Number126
dc.accessType Abstract Only


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