Exploring the connectedness of regional financial markets: application to the GCC equity markets

Yousuf, M

Abstract

This thesis explores the financial connectedness of equity markets in the Gulf Cooperation Council (GCC) countries for the 2005 – 2020 timeframe. The overall study is divided into four key areas. First, we examine the intra-regional connectedness of equity markets within the GCC region. Doing so, we explore the directional flow of spillovers across the markets by using forecast error variance decompositions generated from a Generalized VAR Framework. Second, we explore how the global and regional markets influence the individual GCC equity markets by comparing the inflow of spillovers from global versus regional markets. Third, we examine specific global markets and crude oil prices in relation to the GCC region, assessing which of the global markets is the region most (or least) integrated with. Lastly, we explore the role of news sentiments, in the connectedness of the GCC equity markets. These sentiments are distinguished for each GCC country, enabling us to examine which of the equity markets are most vulnerable to sentiment spillovers; geographically distinguishing between the source of the sentiments. From these four studies, our key empirical findings can be generalized as follows: First, the UAE equity markets strongly influence the other regional equity markets. Second, the GCC equity markets are strongly integrated intra-regionally, when compared with their level of integration with global markets. Third, the connectedness of regional equity markets tends to accelerate during crises events. Fourth, oil price spillovers to the GCC equity markets have decreased over time. Fifth, the GCC equity markets are less influenced by news sentiment shocks, when compared to other regions. Overall, our research largely contributes to the literature on the connectedness of regional financial markets, as well as the literature on the GCC equity markets.

Citation

Yousuf, M. Exploring the connectedness of regional financial markets: application to the GCC equity markets. (Thesis). University of Salford

• Thesis Type: Thesis
• Deposit Date: Oct 5, 2022
• Award Date: May 16, 2022