The Reaction of Stock Markets in the Gulf Cooperation Council Countries to Economic Policy Uncertainty in the United States

This study investigates if the changes in economic policy uncertainty in the U.S. can explain the returns on stock markets of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The study also examines how the stock market returns of the six GCC countries respond to the changes in economic policy uncertainty in the U.S. The results demonstrate that changes in economic policy uncertainty in the U.S. are not significantly linked with the returns on all the stock markets except Oman stock market, which shows a statistical significant negative relationship with the changes in economic policy uncertainty in the U.S. Controlling for the effects of the U.S. stock market and oil price, returns on all the six GCC markets including Oman show insignificant coefficients. The returns on all the stock markets do not respond to the changes in economic policy uncertainty. The results of Granger causality tests show that the changes in economic policy uncertainty in the U.S. do not cause the returns of all the six GCC stock markets.