Journal article
Patterns of volatility transmissions within regime switching across GCC and global markets
International review of economics & finance, Vol.29, pp.512-524
01 Jan 2014
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
Unlike previous studies, this paper examines volatility transmission patterns for pairs of six stock markets of countries of the Gulf Cooperation Council (GCC) and pairs of these markets with the three global markets (S&P 500 index, Oil-WTI prices and MSCI-world), using the Multi-Chain Markov Switching (MCMS) model. This approach allows for a distinction between well diverse transmission patterns including volatility spillover, interdependence, independence and co-movements, given changes from high to low volatility regimes and vice versa. The results find evidence of different transmission patterns between the GCC and the global markets, with stronger connections with the global equity than with the oil markets. These patterns are also highly sensitive to the regimes of the selected markets which are characterized by turbulence or tranquility. For the first global market (Oil-WTI), the results show evidence of strong interdependence between Oil and each of the Kuwait and Abu Dhabi markets. Additionally, there is spillover from Oil-WTI to Dubai whose economy depends on oil, real estate and tourism. Surprisingly, we find evidence of independence between Oil and each of the Saudi Arabia, Qatar and Oman markets. For the second global market (the U.S. S&P 500 index), the results support strong interdependence with Saudi Arabia, Dubai and Abu Dhabi. There is also spillover from the S&P 500 index to Kuwait and Oman. More interestingly, we find spillover from Qatar to the S&P 500 index. For the third global market (MSCI-World), there is interdependence between MSCI and Dubai. We also find evidence of spillover from the MSCI-world to Kuwait and Saudi Arabia. Finally, we provide results in terms of inference on the regimes of high and low volatility, allowing for the interpretation of the financial shocks and the dates in which they are transmitted from one market to another. Policy implications are also provided. (C) 2013 Elsevier Inc. All rights reserved.
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Details
- Title
- Patterns of volatility transmissions within regime switching across GCC and global markets
- Creators
- Ahmed A. A. Khalifa - Qatar UniversityShawkat Hammoudeh - Drexel UniversityEdoardo Otranto - University of Messina
- Publication Details
- International review of economics & finance, Vol.29, pp.512-524
- Publisher
- Elsevier
- Number of pages
- 13
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Identifiers
- 991019167971704721
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- Domestic collaboration
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- Web of Science research areas
- Business, Finance
- Economics