The gcc financial markets : stylized facts and potential roles in regional development

الملخص EN

The paper discusses some stylized facts in financial literature in application to seven GCC capital markets.

The analysis comes in the context of evaluating the potential roles of these markets in enhancing economic development.

Analyzing the technical and statistical aspects of these markets using parametric and non-parametric techniques leads to some interesting results to wit: (a) All the GCC financial markets are weak form inefficient; (b) Volatility in the markets has long memory and shocks to volatility persists for long periods in most of the GCC capital markets; (c) Risk is internally priced and investors get compensated for holding more risk; (d) The GCC markets are highly integrated and consequently, investing across the region has very little impact on risk diversification; and (e) The dynamics in the Saudi and Kuwait stock markets spill over to other markets.

On assessing the potential roles of the GCC financial markets in enhancing regional economic development, the author utilizes Levine’s (1996 and 1997a) two measures for identifying capital markets that act as spur to growth.

Findings reveal that the Saudi Stock Market, and to a lesser extent, the Kuwait Stock Exchange, are the only markets that can contribute to long-run economic development in the area.