Abstract
In this paper, we use a bivariate VAR-asymmetric-BEKK-GARCH model to examine returns, asymmetric volatility spillovers, and time-varying correlations among GCC stock markets (Saudi Arabia, UAE, Qatar, Kuwait, Oman, and Bahrain) and five global factors (Islamic stocks, oil, gold, bonds, and real estate) from July 5, 2004, to March 31, 2021. To take into account the effects of the global financial crisis (GFC) and recent COVID-19 pandemic, we divide the sample period into four sub-periods: the full sample without COVID-19, pre-GFC, post-GFC, and the COVID-19 crisis. The empirical results indicate significant return and volatility spillovers between the GCC stock markets and global factors. Moreover, these spillovers between GCC stock markets and global factors increase in both the return and variance during turbulent periods (post-GFC and COVID-19 crisis periods). The time-varying correlations reveal that gold serves as a hedge and safe haven against most of the GCC stock markets in all sample periods, whereas the results vary across markets and sample periods for bonds, oil, Islamic stocks, and real estate assets against the GCC stocks. Our findings provide useful insights for investors and portfolio managers formulating trading strategies, determining asset allocation, and assembling optimal portfolios, since they persistently pursue challenging investment ideas and alternative asset classes, especially at times of financial crisis and global recession.