Co Integration of Stock Markets of the GCC Nations in the Wake of the Arab Spring of 2010: Analysis of the Relationship between Oil and Stock Market Prices

Abstract

This research study investigates the long run relationship between stock market indices of six GCC nations - Saudi Arabia, Oman, Qatar, Kuwait, UAE and Bahrain. It also studies the long run relationship between oil prices and the combined index of the GCC. A unique addition to this research is the study of the effect of the Arab Spring on co-integration in the case of both these relationships. The time period of the study ranges from May, 2013 to December,2013. Correlation technique and Johansen co-integration test were used for the purpose of analysis. The study has concluded that a strong long run equilibrium relationship exists amongst stock market prices of GCC nations. No long term relationship is detected between oil prices and stock market prices in GCC countries as a group. The Arab Spring has been found to have a minor effect on the co-integrating relation in both contexts.