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Spillovers and predictability between Saudi Arabia and global financial Markets: Evidence from G20 countries

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  • Trabelsi, Nader

Abstract

The objective of this study is to empirically answer the most frequently asked questions about spillover effects and predictability for the nexus between Saudi and other G20 stock markets. Mixed frequency quantile-based approaches are used to measure the dependence between time series. The results show considerable heterogeneity in the co-movement between contemporaneous returns, suggesting different efficiencies. This evidence is long-run and under declining market conditions. They also show great resistance to short-run spillovers, implying that there is no direct spillover channel for the Saudi and other G20 equity markets. However, the co-movement between lagged returns in the short run is more pronounced between KSA and countries that are highly dependent on oil (i.e., largest crude oil exporters or importers). These results suggest that the decision to open up the economy in 2015, along with other economic factors (hydrocarbon wealth, complex trade and financial relationships, etc.), has increased the vulnerability of the Saudi stock market to global shocks, reducing its diversification spectrum.

Suggested Citation

  • Trabelsi, Nader, 2023. "Spillovers and predictability between Saudi Arabia and global financial Markets: Evidence from G20 countries," The North American Journal of Economics and Finance, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:ecofin:v:68:y:2023:i:c:s1062940823001225
    DOI: 10.1016/j.najef.2023.101999
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    References listed on IDEAS

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    1. Charfeddine, Lanouar & Al Refai, Hisham, 2019. "Political tensions, stock market dependence and volatility spillover: Evidence from the recent intra-GCC crises," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    2. Abuzayed, Bana & Al-Fayoumi, Nedal, 2021. "Risk spillover from crude oil prices to GCC stock market returns: New evidence during the COVID-19 outbreak," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    3. Balli, Faruk & Basher, Syed Abul & Jean Louis, Rosmy, 2013. "Sectoral equity returns and portfolio diversification opportunities across the GCC region," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 33-48.
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