Abstract
This study examines how stock market sentiment in a Gulf Cooperation Council (GCC) stock market may spill over to affect sentiments in other markets in the region. Findings from dynamic conditional correlation models in a generalized autoregressive conditional heteroscedasticity (GARCH) framework, traditional Granger causality test and impulse response functions suggest that Kuwait and Qatar stock markets are segregated from other markets in the region. Saudi Arabia and the United Arab Emirates (UAE) markets are well integrated, and any shift in sentiment in either of the two affects the other. Bahrain and Oman are somewhat integrated with the UAE and Saudi stock market sentiments. Thus, when an investor has significant investments in both Saudi Arabia and the UAE, he must be aware of any contagion effect-especially in the case of a stock market panic.