Abstract

This research is examining how volatility travels between major cryptocurrencies and Gulf stock markets. Using daily data for six GCC equity indices (ADX, BAX, DFMGI, KSE, QE, TASI) and five leading cryptocurrencies (Bitcoin, Ethereum, XRP, Dash, Monero) from 2017–2022. Our methodology contains a three-step framework consists of a univariate Garch (1,1) to assess the volatility of each asset. A bivariant BEKK Garch to measure shocks transmission and volatility transmission from cryptocurrencies to Gulf stock market. The last step is using the DCC Garch model to model the time varying correlation. We also split the sample before and after January 2020 to evaluate COVID-19’s effect on cross-market relationship.

Our findings show that the volatility of the cryptocurrencies is much higher and more persistent than the GCC stocks from Garch (1,1). Using the BEKK-GARCH model, we find that volatility spillovers from cryptocurrencies into Gulf stock markets are more pronounced than the direct transmission of shocks. The largest, most liquid coins especially Ethereum and Bitcoin are the main transmitters, while exposure on the Gulf side is uneven. The DCC-GARCH results suggest that, although average correlations between cryptocurrencies and Gulf stocks remain low, they spike during periods of market stress such as the early covid-19 outbreak. Also, the covid-19 creates a turning point by broadening correlation, increasing volatility transmission and changing several signs in correlation and volatility transmission. Which means that the diversification advantage of cryptocurrencies loses its value when investors care the most during stressful times.

In sum, despite regulatory barriers, GCC markets are not insulated from cryptocurrency dynamics. Investors may benefit from cryptocurrencies as diversifiers in stable times, but correlations intensify during crises. For policymakers, the widening post-covid spillovers highlight the need to monitor crypto markets when preparing for stress events.

School

School of Business

Department

Management Department

Degree Name

MS in Finance

Graduation Date

Spring 9-7-2025

Submission Date

9-7-2025

First Advisor

Noha Youssef

Committee Member 1

Yasmin Fouad

Committee Member 2

Maha ElAshram

Extent

48 p.

Document Type

Master's Thesis

Institutional Review Board (IRB) Approval

Approval has been obtained for this item

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