Does the US Stock Market have the Volatility spillover Effect on Gulf Stock Markets

Abstract

To analyze the effects of volatility spillover among the US stock market and Gulf stock markets, i.e., Saudi Arab, Qatar, Oman, Dubai, and Kuwait. The sample of data consist of daily data from 1^st, Jun 2005 to 30^th, Jun 2015 containing all working days in a week. The stationarity of data was analyzed by unit root test and autocorrelation, heteroskedasticity of data was analyzed by ARCH test in this study. The spillover of volatility was seized by employing the M-GARCH model. The factual analysis illustrates the significant effect of bidirectional overflow of return and volatility among Saudi Arab & Qatar, US & Kuwait, Qatar & Kuwait. And the significant transmission of unidirectional effect of volatility spillover among the following countries: Oman to Kuwait, Kuwait to Saudi Arab, Dubai to Qatar, US to Saudi Arab and Dubai. The findings of study are significant for policy maker to defend the local financial markets form the global shocks. With the help of these information the stockholder can make a better decision for the diversification of the portfolio to increase their return with minimum possible level of risk.

        Keywords: Gulf countries, US time series, M-GARCH model, ADF, PP.