Abstract
The paper explores the empirical evidence of the volatility interactions among the Gulf Cooperation Council (GCC) stock markets and world oil price over the weekly period spanning from June 24, 2005 to March 25, 2011. The study is conducted based on the BEKK-GARCH process developed by Kroner and Ng (1998) and outlining the asymmetry in the conditional variances of the stock and oil markets. The findings show evidence of shock and volatility linkages among GCC stock and oil markets, and reveal that the spillover effects are more apparent for volatility patterns. They also indicate that the stock and oil markets exhibit asymmetry in the conditional variances. From the perspective of portfolio strategies, the results display certain sensitivity to the GCC stock prices, allowing thus better understanding of the relationship between each stock market and oil price. Our findings are crucial for practitioners, policy makers and investors who seek to make earnings by diversifying their portfolios. (C) 2014 Elsevier By. All rights reserved.