Contagion Effects of the Global Financial Crisis on GCC Stock Markets

The objectives of this study are twofold: first, it is to investigate whether contagion effects of current Global Financial Crisis present in Gulf Cooperation Council (GCC) stock markets; second, it is to evaluate the impact of such financial crisis on the long-run and short-run dynamic relationships between GCC stock markets and leading conventional and Islamic stock markets around the globe, over the period from July 7, 2004 to August 3, 2012. In order to achieve the two objectives, this study employs three major investigation techniques. First, both standard Pearson correlation and heteroscedasticity adjusted correlation tests are used to investigate the evidence of contagion effects in GCC stock markets. Then, Vector Autoregression (VAR) based Johansen-Juselius (JJ) Cointegration tests are employed to investigate the existence of long-run equilibrium relationships among the stock markets. Finally, Variance Decompositions (VDCs) function is utilized to evaluate the dynamic interacti