IDEAS home Printed from https://ideas.repec.org/a/sae/crmide/v11y2024i3p338-359.html
   My bibliography  Save this article

Co-movement of Oil and Stock Markets During COVID-19: Evidence from the Gulf Corporation Council

Author

Listed:
  • Muhammad Hanif

Abstract

This study aims to document the impact of oil price variations on generating stock returns in Gulf Cooperation Council (GCC) markets during the COVID-19 era. It documents the pandemic era results from January 2020 to October 2022 by employing cointegration, Granger causality, and time-varying coefficient-vector autoregression techniques on daily data. The findings suggest two-way causality between all stock indices and the oil market. Time-dependent relationships were observed during the review period. The findings (based on regression and variance decomposition) indicate that although the reliance of the GCC stock markets was not on oil alone, oil had a significant impact during the study period. It is recommended that investors not consider diversifying portfolios in GCC stocks and oil markets to optimize benefits. The findings are expected to enhance the understanding of academics, market players, regulators, and investors regarding relationships among GCC stocks and oil markets. This study contributes to the literature by documenting the impact of the oil market on stocks during an abnormal period of the COVID-19 pandemic, considering time-varying parameters in a net oil exporting region.

Suggested Citation

  • Muhammad Hanif, 2024. "Co-movement of Oil and Stock Markets During COVID-19: Evidence from the Gulf Corporation Council," Contemporary Review of the Middle East, , vol. 11(3), pages 338-359, September.
    • Handle: RePEc:sae:crmide:v:11:y:2024:i:3:p:338-359
    DOI: 10.1177/23477989241260199
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/23477989241260199
    Download Restriction: no
    File URL: https://libkey.io/10.1177/23477989241260199?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Masoud Shirazi & Ali Emami Meibodi, 2020. "Reaction of Stock Market Index to Oil Price Shocks," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 24(1), pages 99-128, Winter.
    2. Muhammad Hanif, 2020. "Relationship between Oil and Stock Markets: Evidence from Pakistan Stock Exchange," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 150-157.
    3. 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).
    4. Arouri Mohamed el hédi & Fouquau Julien, 2009. "On the short-term influence of oil price changes on stock markets in gcc countries: linear and nonlinear analyses," Economics Bulletin, AccessEcon, vol. 29(2), pages 795-804.
    5. Ewing, Bradley T. & Malik, Farooq, 2016. "Volatility spillovers between oil prices and the stock market under structural breaks," Global Finance Journal, Elsevier, vol. 29(C), pages 12-23.
    6. Mohammad A. Dharmawan & Dominicus S. Priyarsono & Bagus Sartono, 2017. "Impacts of Oil Price Shock on Sector Returns with Regime-Switching Approach: New Evidence from Indonesian Stock Market," International Journal of Energy Economics and Policy, Econjournals, vol. 7(5), pages 44-59.
    7. Mohamed Albaity & Hasan Mustafa, 2018. "International and Macroeconomic Determinants of Oil Price: Evidence from Gulf Cooperation Council Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 8(1), pages 69-81.
    8. Xiaojing Cai & Shigeyuki Hamori & Lu Yang & Shuairu Tian, 2020. "Multi-Horizon Dependence between Crude Oil and East Asian Stock Markets and Implications in Risk Management," Energies, MDPI, vol. 13(2), pages 1-24, January.
    9. Muhammad Hanif & Ariba Sabah, 2020. "Stock Markets’ Integration in Post Financial Crisis Era: Evidence from Literature," Capital Markets Review, Malaysian Finance Association, vol. 28(2), pages 43-71.
    10. Alexey Yurievich Mikhaylov, 2018. "Pricing in Oil Market and Using Probit Model for Analysis of Stock Market Effects," International Journal of Energy Economics and Policy, Econjournals, vol. 8(2), pages 69-73.
    11. Shabbir Ahmad, 2019. "The Impact of Oil Price Uncertainty on Stock Returns in Gulf Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 447-452.
    12. Muhammad Kamran Khan & Jian-Zhou Teng & Muhammad Imran Khan, 2019. "Asymmetric impact of oil prices on stock returns in Shanghai stock exchange: Evidence from asymmetric ARDL model," PLOS ONE, Public Library of Science, vol. 14(6), pages 1-14, June.
    13. Hazem Marashdeh & Akhsyim Afandi, 2017. "Oil Price Shocks and Stock Market Returns in the Three Largest Oil-producing Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 7(5), pages 312-322.
    14. repec:eco:journ2:2017-04-27 is not listed on IDEAS
    15. Sina Davoudi & Alireza Fazlzadeh & Firouz Fallahi & Hossein Asgharpour, 2018. "The Impact of Oil Revenue Shocks on the Volatility of Iran s Stock Market Return," International Journal of Energy Economics and Policy, Econjournals, vol. 8(2), pages 102-110.
    16. Priyanka Aggarwal & Manoj Kumar Manish, 2020. "Effect of Oil Fluctuation on Stock Market Return: An Empirical Study from India," International Journal of Energy Economics and Policy, Econjournals, vol. 10(2), pages 213-217.
    17. Hani El-Chaarani, 2019. "The Impact of Oil Prices on Stocks Markets: New Evidence During and After the Arab Spring in Gulf Cooperation Council Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 214-223.
    18. Shinaj Valangattil Shamsudheen & Mudeer Ahmed Khattak & Aishath Muneeza & Makeen Huda, 2022. "COVID-19 and GCC stock market performance: an analysis of the boon (financial stimulus package) and curse (oil price plunge) effects," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 15(2), pages 223-235, March.
    19. Christopher F Baum & Stan Hurn & Kenneth Lindsay & Jesús Otero, 2022. "Testing for time-varying Granger causality," Stata Journal, StataCorp LP, vol. 22(2), pages 355-378, June.
    20. Filis, George & Degiannakis, Stavros & Floros, Christos, 2011. "Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries," International Review of Financial Analysis, Elsevier, vol. 20(3), pages 152-164, June.
    21. Cody Yu-Ling Hsiao & Weishun Lin & Xinyang Wei & Gaoyun Yan & Siqi Li & Ni Sheng, 2019. "The Impact of International Oil Prices on the Stock Price Fluctuations of China’s Renewable Energy Enterprises," Energies, MDPI, vol. 12(24), pages 1-17, December.
    22. Alexandra Horobet & Georgiana Vrinceanu & Consuela Popescu & Lucian Belascu, 2019. "Oil Price and Stock Prices of EU Financial Companies: Evidence from Panel Data Modeling," Energies, MDPI, vol. 12(21), pages 1-17, October.
    23. Chinnadurai Kathiravan & Murugesan Selvam & Balasundram Maniam & Sankaran Venkateswar, 2019. "Relationship between Crude Oil Price Changes and Airlines Stock Price: The Case of Indian Aviation Industry," International Journal of Energy Economics and Policy, Econjournals, vol. 9(5), pages 7-13.
    24. Wenting Zhang & Xie He & Tadahiro Nakajima & Shigeyuki Hamori, 2020. "How Does the Spillover among Natural Gas, Crude Oil, and Electricity Utility Stocks Change over Time? Evidence from North America and Europe," Energies, MDPI, vol. 13(3), pages 1-26, February.
    25. Shuping Shi & Stan Hurn & Peter C B Phillips, 2020. "Causal Change Detection in Possibly Integrated Systems: Revisiting the Money–Income Relationship [Energy Consumption and Economic Growth in the United States]," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 18(1), pages 158-180.
    26. Lu, Man & Chang, Bisharat Hussain & Salman, Asma & Razzaq, Muthanna G. Abdul & Uddin, Mohammed Ahmar, 2023. "Time varying connectedness between foreign exchange markets and crude oil futures prices," Resources Policy, Elsevier, vol. 86(PB).
    27. Refai, Hisham Al & Zeitun, Rami & Eissa, Mohamed Abdel-Aziz, 2022. "Impact of global health crisis and oil price shocks on stock markets in the GCC," Finance Research Letters, Elsevier, vol. 45(C).
    28. Anil Sharma & Neha Seth, 2012. "Literature review of stock market integration: a global perspective," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 4(1), pages 84-122, April.
    29. Olamide T. Ojikutu & Rita U. Onolemhemhen & Sunday O. Isehunwa, 2017. "Crude Oil Price Volatility and its Impact on Nigerian Stock Market Performance (1985-2014)," International Journal of Energy Economics and Policy, Econjournals, vol. 7(5), pages 302-311.
    30. Rim Ammar Lamouchi & Suha Mahmoud Alawi, 2020. "Dynamic Linkages Between the Oil Spot, Oil Futures, and Stock Markets: Evidence from Dubai," International Journal of Energy Economics and Policy, Econjournals, vol. 10(1), pages 377-383.
    31. Berna Aydogan & Istemi Berk, 2015. "Crude Oil Price Shocks and Stock Returns: Evidences from Turkish Stock Market under Global Liquidity Conditions," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 54-68.
    32. Ankit Sharma & Sasmita Giri & Harsh Vardhan & Sujeet Surange & Rohan Shetty & Vishwaroop Shetty, 2018. "Relationship between Crude Oil Prices and Stock Market: Evidence from India," International Journal of Energy Economics and Policy, Econjournals, vol. 8(4), pages 331-337.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hani El-Chaarani, 2019. "The Impact of Oil Prices on Stocks Markets: New Evidence During and After the Arab Spring in Gulf Cooperation Council Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 9(4), pages 214-223.
    2. Mishra, Shekhar & Mishra, Sibanjan, 2021. "Are Indian sectoral indices oil shock prone? An empirical evaluation," Resources Policy, Elsevier, vol. 70(C).
    3. Khairulla Massadikov, 2021. "Volatility Spillovers between Oil Prices and Stock Returns in Developing Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 121-126.
    4. Xiao, Di & Wang, Jun, 2020. "Dynamic complexity and causality of crude oil and major stock markets," Energy, Elsevier, vol. 193(C).
    5. Sirin, Selahattin Murat & Yilmaz, Berna N., 2024. "Energy transition and non-energy firms’ financial performance: Do markets value capability-based energy transition strategies?," Energy Economics, Elsevier, vol. 136(C).
    6. Ali, Syed Riaz Mahmood & Mensi, Walid & Anik, Kaysul Islam & Rahman, Mishkatur & Kang, Sang Hoon, 2022. "The impacts of COVID-19 crisis on spillovers between the oil and stock markets: Evidence from the largest oil importers and exporters," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 345-372.
    7. Mohamed Albaity & Ray Saadaoui Mallek & Hasan Mustafa, 2022. "Bank Stock Return Reactions to the COVID-19 Pandemic: The Role of Investor Sentiment in MENA Countries," Risks, MDPI, vol. 10(2), pages 1-15, February.
    8. Muhammad Hanif, 2020. "Relationship between Oil and Stock Markets: Evidence from Pakistan Stock Exchange," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 150-157.
    9. Christian Urom & Gideon Ndubuisi & Jude Ozor, 2021. "Economic activity, and financial and commodity markets’ shocks: An analysis of implied volatility indexes," International Economics, CEPII research center, issue 165, pages 51-66.
    10. Evrim Mandacı, Pınar & Cagli, Efe Çaglar & Taşkın, Dilvin, 2020. "Dynamic connectedness and portfolio strategies: Energy and metal markets," Resources Policy, Elsevier, vol. 68(C).
    11. Arturo Lorenzo Valdés & Rocío Durán Vázquez & Leticia Armenta Fraire, 2012. "Conditional Correlation Between Oil and Stock Market Returns: The Case of Mexico," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 7(1), pages 49-63, Enero-Jun.
    12. Coskun, Merve & Taspinar, Nigar, 2022. "Volatility spillovers between Turkish energy stocks and fossil fuel energy commodities based on time and frequency domain approaches," Resources Policy, Elsevier, vol. 79(C).
    13. Al-Fayoumi, Nedal & Bouri, Elie & Abuzayed, Bana, 2023. "Decomposed oil price shocks and GCC stock market sector returns and volatility," Energy Economics, Elsevier, vol. 126(C).
    14. Alao, Rasheed O. & Payaslioglu, Cem, 2021. "Oil price uncertainty and industrial production in oil-exporting countries," Resources Policy, Elsevier, vol. 70(C).
    15. Stavros Degiannakis & George Filis & Vipin Arora, 2018. "Oil Prices and Stock Markets: A Review of the Theory and Empirical Evidence," The Energy Journal, , vol. 39(5), pages 85-130, September.
    16. Shahrestani, Parnia & Rafei, Meysam, 2020. "The impact of oil price shocks on Tehran Stock Exchange returns: Application of the Markov switching vector autoregressive models," Resources Policy, Elsevier, vol. 65(C).
    17. Ashfaq, Saleha & Tang, Yong & Maqbool, Rashid, 2020. "Dynamics of spillover network among oil and leading Asian oil trading countries’ stock markets," Energy, Elsevier, vol. 207(C).
    18. Tarek Tawfik Yousef Alkhateeb & Haider Mahmood, 2020. "Oil Price and Capital Formation Nexus in GCC Countries: Asymmetry Analyses," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 146-151.
    19. Somayeh Kokabisaghi & Mohammadesmaeil Ezazi & Reza Tehrani & Nourmohammad Yaghoubi, 2019. "Sanction or Financial Crisis? An Artificial Neural Network-Based Approach to model the impact of oil price volatility on Stock and industry indices," Papers 1912.04015, arXiv.org, revised Sep 2020.
    20. Moses Tule & Afees Salisu & Charles Chiemeke, 2020. "Improving Nigeria’s Inflation Forecast with Oil Price: The Role of Estimators," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(1), pages 191-229, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:crmide:v:11:y:2024:i:3:p:338-359. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.