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Article
Publication date: 11 January 2021

Abdullah Alqahtani, Shawkat Hammoudeh and Refk Selmi

The findings would help in designing useful and relevant hedging strategies against geopolitical risks (GPRs), which are rampant in the Gulf Cooperation Council (GCC) region.

Abstract

Purpose

The findings would help in designing useful and relevant hedging strategies against geopolitical risks (GPRs), which are rampant in the Gulf Cooperation Council (GCC) region.

Design/methodology/approach

This study focuses on the regional and global costs of GPRs for businesses in the Gulf region.

Findings

The results of the analysis show that the time-varying conditional correlation between the stock returns of the GCC countries and the Saudi Arabian geopolitical risk is consistently negative, suggesting that the Saudi Arabian geopolitical risk hurts the GCC stock markets, thus underscoring the importance of studying regional GPRs.

Originality/value

The contribution of this paper is twofold: First, it uses a newly geopolitical risk index that includes recent geopolitical events not included in the Caldara and Iacoviello (2018) index. In addition to war threats and acts, terrorist threats and acts and nuclear threats, the authors consider global trade tensions (GTTs), Saudi Arabia's geopolitical risk and OPEC news mainly related to OPEC oil production levels. Second, it assesses whether Saudi Arabia, which is the largest economy in the region and the main global oil exporter, is really a risk exporter to the rest of the GCC countries.

Details

Review of Behavioral Finance, vol. 14 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 3 May 2019

Refk Selmi, Rangan Gupta, Christos Kollias and Stephanos Papadamou

Portfolio construction and diversification is a prominent challenge for investors. It reflects market agents’ behavior and response to market conditions. This paper aims…

Abstract

Purpose

Portfolio construction and diversification is a prominent challenge for investors. It reflects market agents’ behavior and response to market conditions. This paper aims to investigate the stock-bond nexus in the case of two emerging and two mature markets, India, South Africa, the UK and the USA, using long-term historical monthly data.

Design/methodology/approach

To address the issue at hand, copula quantile-on-quantile regression (C-QQR) is used to model the correlation structure. Although this technique is driven by copula-based quantile regression model, it retains more flexibility and delivers more robust and accurate estimates.

Findings

Results suggest that there is substantial heterogeneity in the bond-stock returns correlation across the countries under study point to different investors’ behavior in the four markets examined. Additionally, the findings reported herein suggest that using C-QQR in portfolio management can enable the formation of tailored response strategies, adapted to the needs and preferences of investors and traders.

Originality/value

To the best of the authors’ knowledge, no previous study has addressed in a comparative setting the stock-bond nexus for the four countries used here using long-term historical data that cover the periods 1920:08-2017:02, 1910:01-2017:02, 1933:01-2017:02 and 1791:09-2017:02 for India, South Africa, the UK and the USA, respectively.

Details

Studies in Economics and Finance, vol. 38 no. 3
Type: Research Article
ISSN: 1086-7376

Keywords

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