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Modelling Volatility Spillover in GCC Stock Markets Using Structural Time Series Analysis

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This paper investigates volatility spillover among the stock markets of the six member countries of the Gulf Cooperation Council (GCC) by applying the concept of stochastic volatility and structural time series modelling. The results provide strong evidence for bidirectional and unidirectional contemporaneous volatility spillover but reveal weak evidence for lagged volatility spillover. Volatility in the Qatar stock market does not seem to affect or be affected by volatility of any of the other five markets. Moreover, volatility in one market cannot be explained totally by volatility in the other five markets.

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