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Are Kuwaiti Stock Returns Affected by Fluctuations in Oil Prices?

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  • Salem Alshihab
  • Nayef AlShammari

Abstract

This paper examines the impact of fluctuations in the price of oil on Kuwaiti stock market returns for the month-to-month period of 2000 to 2020. The Augmented Dickey-Fuller (ADF) test for stationarity, the error correction model (ECM), and various cointegration test techniques were used to examine the estimated model. In an oil-based economy like Kuwait, the exposure to oil prices seems to affect the performance of the country¡¯s stock market. Our main findings related to the long run showed that the price of oil is cointegrated with stock market returns. Interestingly, our ECM examination confirmed that changes in Kuwaiti stock market returns are only affected by oil price fluctuations in the short run. Further strategies are needed to better stabilize Kuwait¡¯s capital market. This equilibrium can be achieved by pursuing more stability in other macroeconomic factors and providing a solid legal independence for the country¡¯s financial market.

Suggested Citation

  • Salem Alshihab & Nayef AlShammari, 2020. "Are Kuwaiti Stock Returns Affected by Fluctuations in Oil Prices?," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(6), pages 1-9, December.
    • Handle: RePEc:jfr:ijfr11:v:11:y:2020:i:6:p:1-9
    DOI: 10.5430/ijfr.v11n6p1
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    References listed on IDEAS

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    Cited by:

    1. Salah A. Alawadhi & Adedayo E. Longe, 2024. "Oil Price Fluctuation and their Impact on the Macroeconomic Variables: The Case of Kuwait," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 375-386, May.
    2. Mesfer Mahdi Al Mesfer Al Ajmi, 2024. "Impact Of Oil Prices On Boursa Kuwait," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 12(1), pages 21-29.

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