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Nidhaleddine Ben Cheikh, Samy Ben Naceur, Mr. Oussama Kanaan, and Christophe Rault
Our paper examines the effect of oil price changes on Gulf Cooperation Council (GCC) stock markets using nonlinear smooth transition regression (STR) models. Contrary to conventional wisdom, our empirical results reveal that GCC stock markets do not have similar sensitivities to oil price changes. We document the presence of stock market returns’ asymmetric reactions in some GCC countries, but not for others. In Kuwait’s case, negative oil price changes exert larger impacts on stock returns than positive oil price changes. When considering the asymmetry with respect to the magnitude of oil price variation, we find that Oman’s and Qatar’s stock markets are more sensitive to large oil price changes than to small ones. Our results highlight the importance of economic stabilization and reform policies that can potentially reduce the sensitivity of stock returns to oil price changes, especially with regard to the existence of asymmetric behavior.
Nidhaleddine Ben Cheikh, Samy Ben Naceur, Mr. Oussama Kanaan, and Christophe Rault

change on the stock market more effectively. It could also serve to identify the macroeconomic stabilization and reform measures that are key to reducing stock market sensitivity to oil price changes. As is well known, the sign of the relationship between oil prices and stock indices depends on whether a country is a net oil-importing or oil-exporting economy. 3 The literature finds GCC stock markets and oil prices to be significantly and positively correlated. In a recent paper, Dutta et al. (2017) report a positive, significant relationship between oil prices

International Monetary Fund

. 119. In this paper we study the recent developments and the existence of calendar anomalies on the GCC stock markets . The stock market returns correlations among the GCC countries and the U.S. equity market (S&P 500 index) are also examined. Section B analyzes and presents data on stock market returns, market capitalization, and turnover in the GCC countries in recent years. The statistical properties of the stock market index returns in the GCC countries are examined and reported in Section C. Section D investigates the existence of calendar anomalies such as the

Nidhaleddine Ben Cheikh, Samy Ben Naceur, Mr. Oussama Kanaan, and Christophe Rault

Front Matter Page Institute for Capacity Development Contents I. Introduction II. GCC Stock Markets and Oil Prices III. Data and Their Properties A. Data Description B. Unit Root Tests IV. Empirical Methodology A. Econometric Model B. Empirical Specification V. Empirical Results A. Asymmetry Between Positive and Negative Oil Price Changes B. Asymmetry Between Small and Large Oil Price Changes VI. Policy Discussion VII. Conclusion References Appendix Figures Figure 1. Brent Oil Prices vs. GCC Oil Rents Figure 2

International Monetary Fund

Front Matter Page Middle East and Central Asia Department Authorized for distribution by Ahsan H. Mansur Contents I. Introduction II. Institutional Settings and Latest Developments in the GCC Stock Markets III. Data Selection and Sample Construction IV. Empirical Models, Methodology, and Key Descriptive Statistics A. Initial and Aftermarket Abnormal Returns B. Test Statistics C. Determinants of Initial and Aftermarket Abnormal Returns V. Empirical Results A. Initial Abnormal Returns B. Aftermarket Abnormal Performance

Mr. Raphael A Espinoza, Mr. Oral Williams, and Mr. Ananthakrishnan Prasad

Five-Year Senior 2. Nominal Exchange Rates and Interbank Interest Rates 3. Banking System Assets and Capital 4. GCC Stock Market Indices 5. GCC Interbank Rates 6. Sigma Convergence 7. Selected Cross-Listed Stocks in the GCC 8. Gulf Finance House Cross-Listings Tables 1. Structure of the Banking Sector 2. Loans, Deposits and Foreign Assets and Liabilities 3. Restrictions on Resident and Nonresident Deposit Accounts 4. Mergers and Acquisitions 5. Portfolio Investment Asset in GCC Partner - Equity 6. Portfolio Investment Asset in GCC Partner

International Monetary Fund

Banking System Assets and Liabilities, 2017 4. GCC Stock Market Capitalization, 2000–17 5. GCC Debt Markets, 2017 6. Components of the Financial Development Index 7. Financial Development Index 8. Financial Institutions and Markets 9. Financial Markets Development Indicators 10. Financial Institutions Access – Selected Indicators 11. Selected Financial Inclusion Indicators 12. Growth Benefit from Financial Development 13. Growth Benefit from Financial Inclusion 14. Share of SMEs in GDP and Loans TABLE 1. GCC Financial Institutions Assets

International Monetary Fund

Impact of Financial Liberalization Text Tables IV.1. Interest Rate Ceilings in the MENA Region IV.2. MENA: Explicit Interest Rate Ceilings IV.3. Interest Rate Ceilings, 1993–2005 Figures IV.1. Lending Rate Ceilings IV.2. Lending Ceilings and Average Rates IV.3. Volume of Credit per Interest Rate V. Kuwait and Other GCC Stock Markets: Recent Developments and some Efficiency Issues Introduction Stock Market Developments in the GCC Countries Descriptive Statistics of Stock Returns in the GCC Markets and their Correlation with the U.S. Market

International Monetary Fund

ceilings, the government provides ample financing under concessional terms to all SMEs that meet some predetermined criteria. Furthermore, the Islamic banks, which are not subject to the lending rate ceilings, also provide an effective funding channel which goes well beyond the limitations of the traditional banking in SME financing. 5. The fourth paper (Chapter V) discusses recent developments in the Kuwaiti and other GCC stock markets. The stock markets in the GCC countries performed extremely well in the new millennium and the low correlation with the U.S. stock

International Monetary Fund

a modest decline (4 percent) from its peak level in early-December 2005. GCC Stock Market Change 1/ (Percentage change) Cumulative Jan.–Feb. Peak to 2004–05 2006 Feb. 2006 Bahrain 61.2 2.4 -4.6 Kuwait Weighted 93.0 0.4 -4.2 Oman 78.8 7.7 -7.6 Qatar 180.1 -22.8 -33.3 Saudi Arabia 276.6 8.9 -5.5 Abu Dhabi Securities Market (U.A.E.) 296.1 -13.4 -27.8 Dubai Stock Market (U.A.E.) 632.6 -20.2 -35.8 Shua’a Capital Index 2/ 215.0 7