Co-movements of GCC emerging stock markets: New evidence from wavelet coherence analysis

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• 作者：Chaker Aloui ; Besma Hkiri
• 关键词：Co-movement ; Wavelet coherence ; Stock markets ; Value-at-risk
• 刊名：Economic Modelling
• 出版年：January, 2014
• 年：2014
• 卷：36
• 期：Complete
• 页码：421-431
• 全文大小：2446 K

文摘

This paper examines the short term and long term dependencies between stock market returns for the Gulf Cooperation Council (GCC) Countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) during the period 2005-2010. Our empirical investigation is based on the wavelet squared coherence which allows us to assess the co-movement in both time-frequency spaces. Our results reveal frequent changes in the pattern of the co-movements especially after 2007 for all the selected GCC markets at relatively higher frequencies. We further note an increasing strength of dependence among the GCC stock markets during the last financial crisis signifying enhanced portfolio benefits for investors in the short term relative to the long term. On the financial side, we uncover that the strength of co-movement between GCC markets may impact the multi-country portfolio's value at risk (VaR) levels. These findings provide potential implications for portfolio managers operating in the GCC region who are invited to consider co-movement through both frequencies and time when designing their portfolios.