Impact of macroeconomic factors and country risk ratings on GCC stock markets: evidence from a dynamic panel threshold model with regime switching
This study examines the non-linear relationship between stock markets in GCC countries and their country risk ratings as well as with major macroeconomic factors. Based on a dynamic panel threshold model with two and four regimes, the results provide evidence of short-term asymmetry between first-la...
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Published in | Applied economics Vol. 49; no. 13; pp. 1255 - 1272 |
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Main Authors | , , , |
Format | Journal Article |
Language | English |
Published |
London
Routledge
16.03.2017
Taylor & Francis Ltd |
Subjects | |
Online Access | Get full text |
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Summary: | This study examines the non-linear relationship between stock markets in GCC countries and their country risk ratings as well as with major macroeconomic factors. Based on a dynamic panel threshold model with two and four regimes, the results provide evidence of short-term asymmetry between first-lagged GCC stock returns and the performance of GCC stock markets. In addition, only the financial risk (FR) rating has a significant positive effect on the performance of GCC stock markets according to the prevailing regimes for the GCC lagged returns and the Brent oil market. Among the macroeconomic factors, improvements in the global stock markets, the MSCI Global Islamic Index, and the oil price increased the performance of GCC stock markets, whereas increases in the gold price, the 3-month U.S. Treasury bill rate, and the U.S. Treasury bond rate reduced the performance of the GCC stock markets. These results have important implications for investors, policymakers, and portfolio managers. |
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Bibliography: | ObjectType-Article-1 SourceType-Scholarly Journals-1 ObjectType-Feature-2 content type line 23 |
ISSN: | 0003-6846 1466-4283 |
DOI: | 10.1080/00036846.2016.1217305 |