The study of volatility transmissions across markets commonly termed “volatility spillover” provides useful insights into how information disseminate across markets. Research results in this area have useful implications for issues such as international or regional diversification and market efficiency. This paper investigates volatility spillovers GCC stock markets, namely Saudi, Abu-Dhabi, Dubai, Kuwait, Bahrain and Muscat. The objective of the paper is to explore whether volatility surprises in one market influence the volatility of returns in another market in the group. The direction of variance causality on these markets indicates strong evidence of bi-directional volatility spillovers across four of GCC stock markets: Saudi and Kuwait, Kuwait and Abu-Dhabi; Abu-Dhabi and Dubai. This result implies that volatility surprises at any one of these markets influence volatility of returns in the other corresponding market. The other two markets, Muscat and Bahrain, are neither affected by each others’ volatility nor influenced by volatility of other GCC markets.
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