Author : John L. Simpson
Publisher :
ISBN 13 :
Total Pages : 24 pages
Book Rating : 4.:/5 (129 download)
Book Synopsis The Importance of the Relationship between OPEC Oil Prices and Gulf Cooperating Economy Banking Stock Returns by : John L. Simpson
Download or read book The Importance of the Relationship between OPEC Oil Prices and Gulf Cooperating Economy Banking Stock Returns written by John L. Simpson and published by . This book was released on 2015 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Gulf Cooperating Countries (GCC), which include Saudi Arabia and Kuwait, dominate other OPEC cartel countries in oil production. The GCC banking industry is the major component of the GCC stock market. The issue arises as to the strength of the relationship between OPEC oil price returns and GCC banking returns. The OPEC oil market and the GCC stock markets cannot be described as efficient. First order serial correlation exists in level series OPEC prices and in the GCC bank returns index values and in the returns of OPEC oil prices and banking index values. Regression models of unlagged price returns and index returns possess marginal explanatory power with a small positive relationship. A vector autoregressive model on lagged data also indicates this. However, the variables are cointegrated on an optimal one period lag. A vector error correction model indicates a stronger relationship between the variables than originally indicated. It appears that positive one-way causality runs significantly from GCC banking returns to OPEC oil price returns. These relationships are supported by impulse response analysis and variance decomposition. Despite lack of market efficiency, the question needs to be asked as to whether or not increased GCC banking returns partially influence the decisions by the OPEC cartel to restrict production and increase prices. The study should be of interest to regional bankers and economists. The findings reconfirm the interdependence and the importance of the banking industry and the oil industry in the GCC economies. The GCC needs to open stock markets to foreign investment and diversify away from oil dependence.