International transmission of stock returns : mean and volatility spillover effects in the emerging markets of the GCC countries, the developed markets of UK & USA and Oil

This paper will examine the transmission of markets returns and the volatility spillover between the equity markets of developed countries (US and UK), the developing countries in the Gulf Cooperation Council (GCC) and the international prices of oil - Europe Brent Spot Price. A multivariate generalized autoregressive conditional heteroskedasticity (MGARCH-BEKK) model will be used to capture the relation between the different markets. These results imply that, emerging markets in GCC mostly derive their volatility persistence from within the domestic market. That is, emerging markets are vulnerable to conditions within the GCC region, rather from the developed markets, which courage potential benefits of international diversification. The results generally indicate that: (1) own-volatility spillovers are generally higher than cross-volatility spillovers for all markets, but especially for the emerging market (2) It is an important finding here that UK market received volatility persistence from OMAN and UAE markets while USA receive its volatility persistence from OIL, UK and USA (3) Oil market received two significant return spills over effects from the advanced markets of UK and USA (4) None of the GCC markets receive their volatility persistence or volatility spill over from oil while the advanced market of USA received part of its volatility persistence from oil.