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The bubble contagion effect between crude oil and oil-exporting stock markets: the case of GCC countries

Ismail Ben Douissa (College of Business Administration, University of Sharjah, Sharjah, United Arab Emirates)
Tawfik Azrak (Social Sciences University of Ankara, Ankara, Turkey)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 14 March 2023




This study aims to investigate the existence of bubbles and their contagion effect in crude oil and stock markets of oil-exporting countries Gulf Cooperation Council (GCC) from 2016 to 2021.


The authors use Generalized Sup augmented Dickey–Fuller (GSADF) and Backward Sup augmented Dickey–Fuller (BSADF) to significantly identify multiple bubbles stock and oil markets with precise dates. Furthermore, the authors check the contagion effect of bubbles between crude oil and GCC stock markets based on the time-varying Granger causality test.


First, the authors find empirical evidence of downwards bubbles in crude oil prices and in all GCC stock indexes (except the Saudi stock index) during the corona virus disease 2019 (COVID-19) outbreak. Second, the authors do not detect empirical evidence of bubble transmission between crude oil markets and GCC stock markets (except with the Dubai Financial Market index).

Practical implications

The findings of this study would illuminate policymakers not to limit the factors of systematic financial crises in oil-exporting countries to crude oil and to consider factors such as monetary policy and economic diversification measures. This study has also crucial implications for investors. In fact, investors should not ignore the responses of the stock markets to oil price shocks that are heterogeneous across countries when looking for investment opportunities in the GCC region.


The study justifies the changing nature of the bubble contagion effect through the novel implementation of the time-varying Granger causality test to detect whether bubble contagion exists between oil and GCC stock markets and if that does, in which direction.



Ben Douissa, I. and Azrak, T. (2023), "The bubble contagion effect between crude oil and oil-exporting stock markets: the case of GCC countries", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print.



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