Nexus between Financial Markets and Crude Oil Prices: Evidence from Selected GCC Countries
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Purpose: The study evaluates the causal relationship between the oil market and the equity returns. Design/methodology/approach: Five indices are examined (Tadawul All share index, Bahrain all share index, QE general index, FTSE ADX index and Premier market PR index) for this purpose. These indices belong to selected GCC countries. Sample period is from June 7,2009 to December 25, 2022. Causality between two time series is checked using Granger causality test. The study examines hypothesis that whether stock returns granger cause oil prices and vice versa. Findings: The investigation finds that there is a one-way causal linkage between Saudi Arabia and Kuwait, but for the remaining nations, a two-way causal connection is shown. Research limitations/implications: The correlation between oil prices and the share markets of the nations in the GCC is addressed in this study. Nevertheless, more research will concentrate on the relationship between the oil market and the equity markets of significant nations that are not part of the GCC. Additionally, it will conduct a comparison between the GCC and key countries that are not members of the GCC. Originality/value: The findings of this study highlight the most recent correlation between the price of oil and the share markets of the nations of the GCC. This investigation will enhance existing literature analyzing oil market and equity market.
Abstract
Purpose: The study evaluates the causal relationship between the oil market and the equity returns. Design/methodology/approach: Five indices are examined (Tadawul All share index, Bahrain all share index, QE general index, FTSE ADX index and Premier market PR index) for this purpose. These indices belong to selected GCC countries. Sample period is from June 7,2009 to December 25, 2022. Causality between two time series is checked using Granger causality test. The study examines hypothesis that whether stock returns granger cause oil prices and vice versa. Findings: The investigation finds that there is a one-way causal linkage between Saudi Arabia and Kuwait, but for the remaining nations, a two-way causal connection is shown. Research limitations/implications: The correlation between oil prices and the share markets of the nations in the GCC is addressed in this study. Nevertheless, more research will concentrate on the relationship between the oil market and the equity markets of significant nations that are not part of the GCC. Additionally, it will conduct a comparison between the GCC and key countries that are not members of the GCC. Originality/value: The findings of this study highlight the most recent correlation between the price of oil and the share markets of the nations of the GCC. This investigation will enhance existing literature analyzing oil market and equity market.
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