Crude Oil Price Uncertainty and Stock Markets in Gulf Corporation Countries: A Var-Garch Copula Model

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Jaghoubi Salma
Jaghoubi Salma
1 Al Majmaah University, Riyadh, Saudi Arabia

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The main objectives of this study are twofold. The first objective is to examine the volatility spillover between the GCC stock markets and Oil prices, over the period 2005-2012, in a multivariate setting, using the VAR (1)-GARCH (1,1) model which allows for transmission in returns and volatility. The second is to investigate the dependence structure and to test the degree of the dependence between financial returns using copula functions. Five candidates, the Gaussian, the Student’s t, the Frank, the Clayton and the Gumbel copulas, are compared. Our empirical results for the first objective suggest that there exist moderate cross market volatility transmission and shocks between the markets, indicating that the past innovation in stock market have great effect on future volatility in oil market and vice versa. 0

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No external funding was declared for this work.

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The authors declare no conflict of interest.

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No ethics committee approval was required for this article type.

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Not applicable for this article.

Jaghoubi Salma. 2015. \u201cCrude Oil Price Uncertainty and Stock Markets in Gulf Corporation Countries: A Var-Garch Copula Model\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 15 (GJMBR Volume 15 Issue C10): .

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GJMBR Volume 15 Issue C10
Pg. 29- 38
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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-C Classification: JEL Code: B13
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v1.2

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November 28, 2015

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English

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The main objectives of this study are twofold. The first objective is to examine the volatility spillover between the GCC stock markets and Oil prices, over the period 2005-2012, in a multivariate setting, using the VAR (1)-GARCH (1,1) model which allows for transmission in returns and volatility. The second is to investigate the dependence structure and to test the degree of the dependence between financial returns using copula functions. Five candidates, the Gaussian, the Student’s t, the Frank, the Clayton and the Gumbel copulas, are compared. Our empirical results for the first objective suggest that there exist moderate cross market volatility transmission and shocks between the markets, indicating that the past innovation in stock market have great effect on future volatility in oil market and vice versa. 0

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Crude Oil Price Uncertainty and Stock Markets in Gulf Corporation Countries: A Var-Garch Copula Model

Jaghoubi Salma
Jaghoubi Salma Al Majmaah University, Riyadh, Saudi Arabia

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