Journal
ECONOMIC MODELLING
Volume 28, Issue 4, Pages 1815-1825Publisher
ELSEVIER
DOI: 10.1016/j.econmod.2011.03.012
Keywords
Oil prices; GCC stock markets; Optimal portfolio designs; Hedge ratios; VAR-GARCH models
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This paper investigates the return links and volatility transmission between oil and stock markets in the Gulf Cooperation Council (GCC) countries over the period 2005-2010. We employ a recent generalized VAR-GARCH approach which allows for transmissions in return and volatility. In addition, we analyze the optimal weights and hedge ratios for oil-stock portfolio holdings. On the whole, our results point to the existence of substantial return and volatility spillovers between world oil prices and GCC stock markets, and appear to be crucial for international portfolio management in the presence of oil price risk. (C) 2011 Elsevier B.V. All rights reserved.
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