Navigating uncertainty: a study of the S&P GCC composite index’s connectedness during times of crises

Abstract

Purpose

This study aims to investigate the dynamics of return connectedness of the Standard & Poor’s (S&P) Gulf Cooperation Council (GCC) composite index with five regional equity indices, three global equity indices and other different asset classes during the COVID-19 pandemic period.

Design/methodology/approach

This study uses daily data spanning from January 2, 2018, to December 23, 2021. A subsample analysis is conducted to determine the role of uncertainty in modifying the connectedness structure during the ongoing pandemic period.

Findings

The results of this study show that the nature of connectedness is time-frequent, with clear evidence for a higher level of connectedness during stress periods, especially after the onset of the pandemic. The GCC index is found to be a net receiver of shocks to other assets, with an increase in magnitude during the COVID period.

Research limitations/implications

This study is limited by the use of only daily data, and future research could consider using higher frequency data.

Practical implications

The results of this study confirm the disturbing effects of the pandemic on the GCC index and its connectedness with other assets, which matters for policymakers and investors.

Originality/value

This study provides new insights into the dynamics of return connectedness of the GCC index with other assets during the COVID-19 pandemic period, which has not been previously explored.