Global risk transmission in GCC markets

Chinmaya Narayany S.; Asgar Ali; Faisal Nazir Zargar

doi:10.55429/ijabf.v4i2.268

Authors

Chinmaya Narayany S. Birla Institute of Technology and Science (BITS) Pilani, Dubai Campus, Dubai, UAE https://orcid.org/0009-0006-4905-5864
Asgar Ali Birla Institute of Technology and Science (BITS) Pilani, Dubai Campus, Dubai, UAE https://orcid.org/0000-0002-5284-7292
Faisal Nazir Zargar Business School, Middlesex University – Dubai Campus, Dubai, UAE https://orcid.org/0000-0001-9531-3429

DOI:

https://doi.org/10.55429/ijabf.v4i2.268

Keywords:

Global markets, GCC markets, Tail-risk, Time-varying connectedness, DCC-GARCH, TVP-VAR, Volatility Transmission, Emerging markets

Abstract

This study analyses the transmission of global risk across global markets (MSCI US, Brent crude oil, and MSCI Gold) and the Gulf Cooperation Council (GCC) region from January 2009 to November 2024. The study uses a dual econometric framework: first, calculating extreme downside risk with a DCC-GARCH model, and then capturing the direction and magnitude of risk spillovers with a TVP-VAR model. The analysis helps determine how the relationships between these indices evolve during periods of global financial crises and uncertainty. Results show that GCC markets are highly vulnerable to external shocks and predominantly net recipients of risk. The US market emerges as the strongest net transmitter of volatility, especially during periods of crisis. Brent crude oil serves as both a transmitter and a receiver of risk, while gold serves as a shock absorber and remains a safe-haven asset. Robustness checks using alternate specifications confirm the reliability of these findings.

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