DYNAMIC RELATIONSHIP BETWEEN GULF STOCK MARKETS IN THE CONTEXT OF COVID-19: GRANGER CAUSALITY APPROACH

Abstract

This paper aims to examine the volatility spillover between Gulf and Chinese stock markets by investigating the effects of Covid-19 on the relationships between these markets by examining whether there is an increase in the number or intensity of causal relationships compared with that of the pre-Covid 19 periods. In order to achieve the research-based objectives, we use the Granger causality approach to examine the relationships in terms of volatility across stock markets. The findings indicate that the Ganger Causality between the stock markets during covid-19 is significantly higher than in the pre-covid-19 period. Furthermore, new significant causal linkages arose together with the intensification of the causal relationship in 55.5% of cases in which we detect causality during both the pre-covid and covid-19 periods. These additional linkages during the covid-19 period in excess of those that precede it significantly generate the international transmission development of volatility and the risk of contagion.