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Shock and volatility transmission in the oil, US and Gulf equity markets
Journal article   Peer reviewed

Shock and volatility transmission in the oil, US and Gulf equity markets

Farooq Malik and Shawkat Hammoudeh
International review of economics & finance, v 16(3), pp 357-368
2007

Abstract

Multivariate GARCH Oil prices Stock returns Volatility
This paper examines the volatility and shock transmission mechanism among US equity, global crude oil market, and equity markets of Saudi Arabia, Kuwait, and Bahrain. Our results show significant transmission among second moments. In all cases, Gulf equity markets receive volatility from the oil market but only in the case of Saudi Arabia we found a significant volatility spillover from the Saudi market to the oil market. Our results are important for building accurate asset pricing models, forecasting future equity and oil price return volatility, and will further our understanding of the interaction of the stock markets of Gulf countries vis-à-vis the US equity market and the global oil market.

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