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Search for safe havens and resilience to global financial volatility: Response of GCC equity indexes to GFC and Covid-19

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  • Hassan, M. Kabir
  • Kamran, Muhammad
  • Djajadikerta, Hadrian Geri
  • Choudhury, Tonmoy

Abstract

The bear Gulf Cooperation Council (GCC) sectoral equity markets in the midst of the COVID-19 pandemic presented us a test case to revisit the previously proclaimed refuge facets of gold and other precious commodities, as well as to find the resilience of these markets to global financial volatility. We further make a comparison of our findings with those obtained for the 2008 Global Financial Crisis (GFC) period. New evidence from our study based on bivariate Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity model confirms the potential of gold to serve as a weak safe haven amid both financial crises albeit with higher effectiveness during the early phase of the COVID-19 pandemic. As a whole, silver and crude oil couldn't offer sanctuary for GCC's sectoral equity markets. Further results show that unless hedged, returns of GCC equity markets are vulnerable to volatility and risk in the global financial markets.

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  • Hassan, M. Kabir & Kamran, Muhammad & Djajadikerta, Hadrian Geri & Choudhury, Tonmoy, 2022. "Search for safe havens and resilience to global financial volatility: Response of GCC equity indexes to GFC and Covid-19," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:pacfin:v:73:y:2022:i:c:s0927538x22000634
    DOI: 10.1016/j.pacfin.2022.101768
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    More about this item

    Keywords

    COVID-19; DCC-GARCH; GCC sectoral equity indexes; GFC; Safe havens; Global financial volatility;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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