Abstract:
This thesis investigates the impacts that bills on energy policy, introduced and
discussed in the US Congress, have on the variance process of the five largest Gulf
Cooperation Council stock markets. Since the US is the largest consumer of crude oil
in the world and the GCC region is one of the most influential suppliers of crude oil,
we investigate the hypothesis whether public news on US energy policy bills has a
reversal impact on the GCC stock markets’ conditional variance. Augmenting the
Asymmetric Generalized Autoregressive Conditional Heteroskedasticity (AGARCH)
model of Glosten et al. (1993) with indicators determined in terms of the dates when
the US energy policy bills are introduced, we find that the conditional variance of the
GCC markets tends to revert on days when the bills are introduced and discussed in
the US Congress. This finding is consistent with the learning hypothesis in the
financial economics literature. Furthermore, examining the robustness of our finding
within the AGARCH model to endogenous effects, we find that the variance
responses of the GCC markets to public news on the dates of bills are not solely
driven by market specific effects.
