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Pacific-Basin Finance Journal 73 (2022) 101768
Contents lists available at ScienceDirect
Pacific-Basin Finance Journal

journal homepage: www.elsevier.com/locate/pacfin
Search for safe havens and resilience to global financial volatility:

Response of GCC equity indexes to GFC and Covid-19
M. Kabir Hassan a, *, Muhammad Kamran b, Hadrian Geri Djajadikerta b,
Tonmoy Choudhury c
a
University of New Orleans, United States
b
Edith Cowan University, Australia
c
IRC for Finance and Digital Economy, Department of Accounting & Finance, KFUPM Business School, King Fahd University of Petroleum and
Minerals, KSA, Saudi Arabia
A R T I C L E I N F O A B S T R A C T
JEL classification: The bear Gulf Cooperation Council (GCC) sectoral equity markets in the midst of the COVID-19
C32 pandemic presented us a test case to revisit the previously proclaimed refuge facets of gold and
G01 other precious commodities, as well as to find the resilience of these markets to global financial
G11
volatility. We further make a comparison of our findings with those obtained for the 2008 Global
G15
Financial Crisis (GFC) period. New evidence from our study based on bivariate Dynamic Con
Keywords:
ditional Correlation Generalized Autoregressive Conditional Heteroskedasticity model confirms
COVID-19
the potential of gold to serve as a weak safe haven amid both financial crises albeit with higher
DCC-GARCH
GCC sectoral equity indexes effectiveness during the early phase of the COVID-19 pandemic. As a whole, silver and crude oil
GFC couldn’t offer sanctuary for GCC’s sectoral equity markets. Further results show that unless
Safe havens hedged, returns of GCC equity markets are vulnerable to volatility and risk in the global financial
Global financial volatility markets.
1. Introduction
On March 11, 2020, the world awakened to a perilous reality when World Health Organization (2020) declared COVID-19 a global
pandemic. The news triggered the market-wide circuit-breakers four times in March 2020 alone in the United States of America
(Contessi and De Pace, 2021). The outbreak of COVID-19 which originated as a regional health crisis in China spread worldwide in a
few months and drove the world economy to a standstill (Choudhury et al., 2021; Mensi et al., 2020). Akin to its massive scale of
upheavals, financial markets around the world plummeted to their lowest levels in many decades (Baker et al., 2020). Still, the world is
weighing the economic shock it caused to the global economy and human lives by unsettling the financial markets, disrupting global
supply chains and affecting production outputs (Rahman et al., 2021; Remko, 2020). Keeping in view the critical role of supply chains
in the environmental, economic, operational and social success of organizations (Butt et al., 2021), this pandemic is being considered a
‘once-in-a-century global event’ (Cruickshank and Shaban, 2020) ‘once-in-a-century pandemic’ (Gates, 2020) and a ‘black swan event’
(Omane-Adjepong and Alagidede, 2021) that is not expected to depart very soon (World Bank, 2020).
* Corresponding author at: Department of Economics and Finance, University of New Orleans, University Center, 2000 Lakeshore Drive, New
Orleans, LA 70148, United States.
E-mail addresses: mhassan@uno.edu (M.K. Hassan), m.kamran@ecu.edu.au (M. Kamran), h.djajadikerta@ecu.edu.au (H.G. Djajadikerta),
tonmoy.choudhury@kfupm.edu.sa (T. Choudhury).
https://doi.org/10.1016/j.pacfin.2022.101768
Received 19 July 2021; Received in revised form 7 February 2022; Accepted 23 April 2022
Available online 27 April 2022
0927-538X/© 2022 Elsevier B.V. All rights reserved.
M.K. Hassan et al. Pacific-Basin Finance Journal 73 (2022) 101768
To salvage the national economies and curb this emerging havoc wrought by the pandemic, the world witnessed several variants of
international responses across economic, epidemiological and social frontiers. It involved offering stimulus packages through im
mediate monetary and fiscal measures (Ashraf, 2020) and enforcing mandatory closures, lockdowns and social distancing measures
(Baig et al., 2021). But these preventive measures have shattered the fundamental sustainability pillars of the global economy and sent
financial markets into tailspins by sparking immense volatility and uncertainty in them (Akhtaruzzaman et al., 2020; Banerjee, 2021;
Corbet et al., 2020b). The heightened uncertainties and the continual high market risk engendered by COVID-19 have rekindled the
interest of investors to instantly come up with some risk-minimizing assets known as ‘safe haven assets’ (Corbet et al., 2020a; Ji et al.,
2020; Le et al., 2021).
On that connection, researchers have tested several assets in search of a refuge that can offset the declining returns of investors, but
their findings are largely inconclusive. For example, Corbet et al. (2020a) found that cryptocurrencies are a good store of value and
offer significant diversifications benefits. However, several others (e.g., Cheema et al., 2020; Conlon et al., 2020; Conlon and McGee,
2020; Corbet et al., 2020b; Goodell and Goutte, 2021; Kristoufek, 2020) cast doubts on their ability to hedge portfolio returns during a
financial turmoil and even called them an amplifier of contagion. Some others acknowledged their effectiveness as a weak safe haven
(Jana and Das, 2020) or a short-term refuge only (Dwita Mariana et al., 2021). Recently, Kamran et al. (2021) found inconsistent safe
haven properties of Bitcoin when combined in a portfolio with different Australian stock indexes.
Ji et al. (2020) stated that COVID-19 has weakened the safe haven capabilities of crude oil commodity futures, forex currencies and
Bitcoin but gold and soybean commodity futures can still be trusted as robust safe-haven assets. Several others (e.g., Akhtaruzzaman
et al., 2020; Boubaker et al., 2020; Corbet et al., 2020b; Hussain Shahzad et al., 2020; Jana and Das, 2020; Kristoufek, 2020; Salisu
et al., 2021) provided empirical evidence to support the long-standing refuge characteristics of gold. However, counter-evidence by
others (e.g., Cheema et al., 2020; Omane-Adjepong and Alagidede, 2021) challenged the safe haven capability of gold once again.
Hassan et al. (2021) concluded that sovereign bonds are now the safest assets to safeguard investments in GCC stock indexes. Yarovaya
et al. (2020) reported that an effective hedge of conventional bond markets during COVID-19 can be achieved through Islamic bonds
(Sukuk). Hasan et al. (2021) while comparing the safe-haven role of twelve assets against the US stock market found that silver and the
Islamic stock index were safe havens during the 2008 GFC, and the Islamic stock index and Tether have been safe havens during
COVID-19.
These emerging pieces of evidence indicate that the pressing need of investors at the current times to seeking refuge in safe haven
assets predominantly coincides with the GFC (Kinateder et al., 2021) when investors suffered significant loss merely due to lack of
sufficient understanding of safe assets’ behavior (Hkiri et al., 2017). Recently, Hassan et al. (2021) found that the previously pro
claimed safe havens which were fairly effective during the GFC period, have been faded at the time of COVID-19. Their findings
corroborate the argument that financial contagion originated from a pandemic such as COVID-19 is characteristically unique from
those caused either by the GFC or by any war (Sharif et al., 2020). As the underlying causes of both the GFC and the COVID-19
pandemic are different, stock markets’ reactions to safe havens could also vary accordingly (Disli et al., 2021). Hence, a compari
son of safe havens’ performance during COVID-19 and the GFC could be more insightful to pick the safest sanctuaries (Cheema et al.,
2020; Kinateder et al., 2021). Analyzing all these arguments together, this comparison becomes germane to ensure the effectiveness of
traditionally expounded safe havens during the COVID-19 pandemic.
Weighing on the lack of consensus on the safe havens for equity markets and the dearth of existing literature on the GCC sectoral
equity indexes, we examine the long-standing refuge characteristics of gold, silver and crude oil amid both the GFC and the COVID-19
pandemic. Another contribution of our paper is analyzing the resilience of GCC sectoral equity indexes to the escalating global
financial volatility and uncertainty that are bound to rise during a financial crisis (Faff et al., 2019; Hill et al., 2018; Ibrahim and Rizvi,
2018). Lastly, we employed an extended COVID-19 sample period to encompass post-government social distancing measures, eco
nomic stimulus packages, current trends of the crisis including its peak levels and the reportedly second-wave and third-wave of
COVID-19 in GCC countries. All these factors have been acknowledged as a potential source that intensifies the uncertainties in the
financial markets and actuate investors to search sanctuaries (Omane-Adjepong and Alagidede, 2021).
Our major findings indicate that gold acts as a weak safe haven amid both financial crises i.e., the GFC and COVID-19. Albeit gold
exhibited higher effectiveness during the early phase of the COVID-19 pandemic. The other two global commodities i.e., silver and
Table 1
List of variables used in this study.
Bahrain Sectoral Kuwait Sectoral Oman Sectoral Qatar Sectoral Saudi Arabia UAE Sectoral Global Indexes
Indexes Indexes Indexes Indexes Sectoral Indexes Indexes
Bahrain Market Kuwait Banks Oman Consumer Qatar Consumer Saudi Arab Market UAE. Financials CBOE SPX
(BHRALSH) (KWALBNK) Staples (COSTPOM) Staples (COSTPQA) (TOTMKSI) (FINANAE) Volatility VIX
(CBOEVIX)
Bahrain Banks Kuwait Market Oman Industrials Qatar Industrials Saudi Arab UAE. Consumer S&P GSCI Silver
(BHRABNK) (KWALGEN) (INDUSOM) (INDUSQA) Financials Staples (COSTPAE) Spot (GSSISPT)
(FINANSI)
Bahrain Industrial Kuwait Industrial Oman Market Qatar Market Saudi Arab UAE. Industrials S&P GSCI Gold
(BHRAIND) (KWALIND) (TOTXROM) (TOTMKQA) Industrials (INDUSAE) Spot (GSGCSPT)
(INDUSSI)
Bahrain Basic Kuwait Oman Banks Qatar Financials Saudi Arab Basic UAE. Market S&P GSCI Crude
Materials Investment (X4OMBKL) (X1QAFNL) Materials (TOTMKAE) Oil Spot
(BMATRBA) (KWALINV) (BMATRSI) (GSCLSPT)
2
Table 2
Descriptive statistics.
Bahrain Bahrain Bahrain Bahrain Basic Saudi Arab Saudi Arab Saudi Arab Saudi Arab Basic
Market Banks Industrial Materials Market Financials Industrials Materials
Mean − 0.001 0.001 − 0.001 − 0.001 − 0.001 − 0.001 − 0.001 − 0.001

SE 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001
Median − 0.001 0.001 − 0.001 0.000 0.002 0.000 0.002 0.002
SD 0.013 0.020 0.027 0.027 0.032 0.032 0.033 0.041
Sample Variance 0.001 0.001 0.001 0.001 0.001 0.001 0.002 0.002
Kurtosis 10.165 10.935 36.736 38.857 10.871 8.969 16.284 10.536
Skewness − 1.160 − 0.657 − 1.755 − 2.013 − 1.236 − 0.846 − 1.672 − 1.042
Jarque-Bera 9513.509 10,851.145 192,978.715 218,389.766 11,414.809 6455.405 31,475.343 10,253.030
p-Value 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Count 4026 4026 4026 4026 4026 4026 4026 4026
Kuwait Kuwait Kuwait Kuwait UAE. UAE. UAE. Industrials UAE. Market
Banks Market Industrial Investment Financials Consumer
Staples
Mean 0.001 − 0.001 − 0.002 − 0.002 − 0.001 0.003 − 0.001 − 0.001
SE 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001
Median 0.001 0.001 − 0.001 − 0.002 0.001 0.000 0.001 0.001
SD 0.025 0.025 0.033 0.029 0.029 0.042 0.039 0.027
Sample Variance 0.001 0.001 0.002 0.001 0.001 0.002 0.002 0.001
Kurtosis 12.742 12.715 9.513 6.993 11.620 14.158 10.020 13.237
Skewness − 1.044 − 1.256 − 0.773 − 0.548 − 1.005 1.645 − 0.469 − 1.266
Jarque-Bera 16,650.854 16,889.217 7515.963 2875.308 13,138.721 22,698.947 8413.135 18,654.065
p-Value 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Count 4026 4026 4026 4026 4026 4026 4026 4026
Oman Oman Oman Oman Banks CBOE SPX S&P GSCI S&P GSCI S&P GSCI Crude
Consumer Industrials Market Volatility Silver Spot Gold Spot Oil Spot
Staples VIX
Mean 0.002 − 0.001 − 0.001 0.001 0.001 0.002 0.002 0.001
SE 0.001 0.001 0.001 0.001 0.003 0.001 0.001 0.001
Median 0.000 0.000 0.001 0.001 − 0.007 0.003 0.003 0.003
SD 0.021 0.026 0.020 0.025 0.136 0.042 0.023 0.052
Sample Variance 0.001 0.001 0.001 0.001 0.019 0.002 0.001 0.003
Kurtosis 11.563 18.165 19.297 17.054 7.444 9.342 7.043 38.636
Skewness 0.718 − 1.768 − 1.451 − 0.833 0.864 − 0.877 − 0.245 − 1.168
Jarque-Bera 12,644.685 40,675.196 45,958.881 33,593.313 3812.961 7260.556 2781.610 213,939.007
p-Value 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Count 4026 4026 4026 4026 4026 4026 4026 4026
Qatar Qatar Qatar Qatar

Consumer Industrials Market Financials
Staples
Mean 0.002 − 0.001 0.001 0.001
SE 0.001 0.001 0.001 0.001
Median − 0.001 0.001 0.001 0.001
SD 0.033 0.034 0.028 0.030
Sample Variance 0.002 0.002 0.001 0.001
Kurtosis 9.012 11.174 11.148 10.929
Skewness 0.427 − 0.669 − 0.879 − 0.962
Jarque-Bera 6184.871 11,505.806 11,654.236 11,165.417
p-Value 0.000 0.000 0.000 0.000
Count 4026 4026 4026 4026
This table presents the descriptive statistics of the sample of the study including mean, standard error, median, standard deviation, sample variance,
kurtosis, skewness, and the Jarque-Bera normality test. The variables are (with DataStream code) 5 trading day return of Bahrain Market (BHRALSH),
Bahrain Banks (BHRABNK), Bahrain Industrial (BHRAIND), Bahrain Basic Materials (BMATRBA), Kuwait Banks (KWALBNK), Kuwait Market
(KWALGEN), Kuwait Industrial (KWALIND), Kuwait Investment (KWALINV), Oman Consumer Staples (COSTPOM), Oman Industrials (INDUSOM),
Oman Market (TOTXROM), Oman Banks (X4OMBKL), Qatar Consumer Staples (COSTPQA), Qatar Industrials (INDUSQA), Qatar Market
(TOTMKQA), Qatar Financials (X1QAFNL), Saudi Arab Market (TOTMKSI), Saudi Arab Financials (FINANSI), Saudi Arab Industrials (INDUSSI),
Saudi Arab Basic Materials (BMATRSI), UAE. Financials (FINANAE), UAE. Consumer Staples (COSTPAE), UAE. Industrials (INDUSAE), UAE. Market
(TOTMKAE), CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot (GSGCSPT), S&P GSCI Crude Oil Spot
(GSCLSPT) for the sample period of January 2, 2006 to June 10, 2021.
3
crude oil, in general, couldn’t offer refuge to GCC’s sectoral equity markets. Lastly, our results illustrate that unless hedged, returns of
GCC equity markets are vulnerable to volatility and risk in the global financial markets. Hence investors and portfolio managers are
advised to continuously monitor and adjust their investment and diversification strategy to keep their investments safe during a
financial crisis. The outline of the remaining sections is given below: Section 2 describes the data, research methodology as well as
preliminary analysis. Section 3 discusses the main results and the robustness test we employed. We conclude our study in Section 4
with a policy discussion.
2. Data and methodology
2.1. Data and preliminary analysis
The daily (closing) prices of the major GCC sectoral indexes, global financial volatility index; Chicago Board Options Exchange
(CBOE) SPX Volatility VIX and three global commodity indexes; S&P GSCI silver spot, S&P GSCI gold spot and S&P GSCI crude oil spot
were obtained from Thomson Reuters Datastream. We selected the top four sectoral equity indexes from each GCC country. As a
screening criterion, we only selected the sectoral index without any missing data. Otherwise, it was replaced with the next sectoral
index in the list. Details of all the sectoral and global indexes along with their DataStream codes in parentheses are listed in Table 1.
Since the collected data pertains to several countries, the actual volatility of the series could possibly be lower than the daily volatility.
Secondly, the data could also be susceptible to the weekend effect. Hence, following other researchers (e.g., Batten et al., 2015; Hassan
et al., 2021), we estimated a 5-trading day return (continuously compounded) Rt = ln(Pt) – ln(Pt-5) to address non-synchronous
trading days and avoid bid-ask effects (Kinateder et al., 2021). Given the GCC markets do not operate on Fridays whereas other in
dexes included in our sample trade from Monday to Friday, we used the weekly frequency from Wednesday to next Tuesday in
calculating the 5-trading day returns.
The descriptive statistics of the sample for the period of January 2, 2006, to June 10, 2021, are reported in Table 2. It summarizes
mean, median, standard deviation, standard error, sample variance, skewness, kurtosis, and the Jarque-Bera normality test. The
majority of the indexes reported negative mean returns over the sample period. For example, in the case of Bahrain and Kuwait, only
their banks’ indexes exhibit positive (0.1%) mean return. The United Arab Emirates (UAE) consumer staples index records the highest
mean return i.e., 0.3% among all the sectoral indexes in GCC countries. The other three sectoral indexes of the UAE yield negative
returns. Findings are mixed on Oman’s sectoral indexes where the consumer staples index and the banks index report positive whereas
the industrials index and the market index exhibit negative mean values. Qatar emerged as the most rewarding country where all its
sectoral indexes report positive mean return excluding the industrials index. Contrarily, Saudi Arabia comes at the bottom in terms of
mean return as all its sectoral indexes offered negative returns.
The global indexes in our study indicate positive means where VIX and crude oil record 0.1% and silver and gold exhibit 0.2% mean
values. In terms of volatility (standard deviation), sectoral indexes’ returns in Saudi Arabia are the most volatile as they all have
standard deviation of above 0.032 whereas returns among the Bahrain sectoral indexes are more stable than any other GCC country as
its market index only reports 0.013 standard deviation. Among the global indexes, crude oil is the most volatile one with standard
deviation of 0.052. All the sectoral indexes in our sample are negatively skewed except for the Consumer Staples indexes in Qatar,
Oman and UAE that are positively skewed. Similarly, excluding the VIX, all the other three global indexes are negatively skewed.
Among the GCC countries, the Bahrain industrials index exhibits the highest kurtosis (36.736). However, in the overall sample, the
kurtosis of crude oil is even higher i.e., 38.636.
Table 3 presents the pairwise Pearson correlation (unconditional) between each GCC sectoral equity index and global index in our
sample. Among the Bahrain sectoral indexes, the industrial index and the basic materials index emerge as the most correlated pair
(0.938) while its banks and industrial indexes are the least correlated indexes (0.051). Estimating their correlation with global indexes,
the Bahrain banks and crude oil stand out as the most correlated pair (0.142). The lowest but significant correlation, in that case, exists
between the Bahrain industrial and VIX (− 0.039). Regarding Kuwait and Oman, the correlations within their sectors are higher
compared to their correlation with global indexes. For these two countries, their banks index indicates a correlation of 0.9 with their
market index making it the most correlated sectoral index pair. Whereas the Oman bank index and consumer staples index (correlation
of 0.352) and the Kuwait Banks index and investment index (0.573) are the least correlated pairs among their respective sectors. The
unconditional correlations of their sectoral indexes with global indexes also show few similarities. For example, their highest corre
lation exists with crude oil i.e., 0.231 (with Oman market) and 0.175 (with Kuwait market). Similarly, gold reports the lowest cor
relations for these countries i.e., 0.04 (with Oman industrials) and 0.039 (with Kuwait market).
Qatar market reports the most correlated pairs both within its sectors i.e., 0.933 (with the financials index) and with global indexes
i.e., − 0.251 (with VIX). Similarly, UAE Financials exhibits the highest correlation both within its sectors (0.970 with UAE market) and
also against global indexes (− 0.236 with VIX). In the case of Saudi Arabia, its basic materials index forms the most correlated pairs
both within the sectors and with global indexes i.e., 0.924 with the Saudi Arab market and 0.285 with crude oil.
2.2. DCC-GARCH model
Following previous studies (e.g., Akhtaruzzaman et al., 2020; Akhtaruzzaman et al., 2021b; Corbet et al., 2021; Dwita Mariana
et al., 2021), we used the dynamic conditional correlation (DCC) model introduced by Engle (2002) to model bivariate vector (2 × 1)
Rt = (Rse, t, RGI, t)′ of conditional sectoral index returns, Rse, t and global index returns, RGI, t as follows.
4
Table 3
M.K. Hassan et al.

Correlation matrix (2-tailed).
CBOE SPX S&P S&P S&P Bahrain Bahrain Bahrain Bahrain CBOE S&P S&P S&P Kuwait Kuwait Kuwait Kuwait
VOLATILI GSCI GSCI GSCI Market Banks Industrial Basic SPX GSCI GSCI GSCI Banks Market Industrial Investmen
TY VIX Silver Gold Spot Crude Oil Materials VOLATI Silver Gold Spot Crude Oil t
Spot Spot LITY Spot Spot
VIX
CBOE SPX 1 CBOE SPX 1
VOLATILITY VIX VOLATILITY VIX
S&P GSCI Silver Spot -.183** 1 S&P GSCI Silver Spot -.183** 1
S&P GSCI Gold Spot -0.0293 .809** 1 S&P GSCI Gold Spot -0.0293 .809** 1
S&P GSCI Crude Oil -.270** .305** .204** 1 S&P GSCI Crude Oil -.270** .305** .204** 1
Spot Spot
Bahrain Market -.087** .105** 0.015941 .130** 1 KUWAIT BANKS -.132** .093** .064** .170** 1
Bahrain Banks -.074** .068** -0.00046 .142** .828** 1 KUWAIT MARKET -.140** .092** .039* .175** .918** 1
Bahrain Industrial -.039* .069** 0.02834 0.028775 .269** .051** 1 KUWAIT -.095** .086** 0.027458 .151** .633** .752** 1
INDUSTRIAL
Bahrain Basic -.043** .056** 0.020436 0.024434 .268** .057** .938** 1 KUWAIT -.076** .072** 0.001259 .136** .573** .681** .584** 1
Materials INVESTMENT
CBOE SPX S&P S&P S&P OMAN OMAN Oman Oman CBOE S&P S&P S&P Qatar Qatar Qatar Qatar
VOLATILI GSCI GSCI GSCI Consumer Industrials Market Banks SPX GSCI GSCI GSCI Consumer Industrials Market Financials
TY VIX Silver Gold Spot Crude Oil Staples VOLATI Silver Gold Spot Crude Oil Staples
Spot Spot LITY Spot Spot
VIX
Spot Spot
OMAN Consumer -.070** .062** 0.023701 .119** 1 QATAR Consumer -.108** .050** 0.004861 .090** 1
Staples Staples
OMAN Industrials -.167** .135** .042** .193** .398** 1 QATAR Industrials -.232** .130** .040* .225** .425** 1
OMAN MARKET -.188** .160** .064** .231** .444** .796** 1 QATAR Market -.251** .141** .045** .239** .481** .880** 1
OMAN BANKS -.176** .152** .056** .219** .352** .656** .900** 1 QATAR -.233** .124** .043** .217** .453** .780** .933** 1
FINANCIALS
CBOE SPX S&P S&P S&P Saudi Saudi Saudi Saudi CBOE S&P S&P S&P UAE. UAE. UAE. UAE.
5
VOLATILI GSCI GSCI GSCI Arab Arab Arab Arab SPX GSCI GSCI GSCI Financials Consumer Industrials Market
TY VIX Silver Gold Spot Crude Oil Market Financials Industrials Basic VOLATI Silver Gold Spot Crude Oil Staples
Spot Spot Materials LITY Spot Spot
VIX
Spot Spot
Saudi Arab Market -.261** .082** -0.02848 .244** 1 UAE. Financials -.236** .151** 0.02137 .231** 1
Saudi Arab Financials -.248** .065** -.045** .223** .922** 1 UAE. Consumer -.049** .042** -0.0008 0.018363 .296** 1
Staples
Saudi Arab Industrials -.181** 0.017537 -.048** .134** .789** .700** 1 UAE. Industrials -.190** .137** .067** .166** .689** .313** 1
Saudi Arab Basic -.258** .119** 0.010045 .285** .924** .764** .680** 1 UAE. Market -.234** .150** 0.017506 .217** .970** .340** .716** 1
Materials
This table reports the pairwise correlation and associated p-values for each pair of variables of the study. The variables are (with DataStream code) 5 trading day return of Bahrain Market (BHRALSH),

Bahrain Banks (BHRABNK), Bahrain Industrial (BHRAIND), Bahrain Basic Materials (BMATRBA), Kuwait Banks (KWALBNK), Kuwait Market (KWALGEN), Kuwait Industrial (KWALIND), Kuwait
Investment (KWALINV), Oman Consumer Staples (COSTPOM), Oman Industrials (INDUSOM), Oman Market (TOTXROM), Oman Banks (X4OMBKL), Qatar Consumer Staples (COSTPQA), Qatar
Industrials (INDUSQA), Qatar Market (TOTMKQA), Qatar Financials (X1QAFNL), Saudi Arab Market (TOTMKSI), Saudi Arab Financials (FINANSI), Saudi Arab Industrials (INDUSSI), Saudi Arab Basic
Materials (BMATRSI), UAE. Financials (FINANAE), UAE. Consumer Staples (COSTPAE), UAE. Industrials (INDUSAE), UAE. Market (TOTMKAE), CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver
Spot (GSSISPT), S&P GSCI Gold Spot (GSGCSPT), S&P GSCI Crude Oil Spot (GSCLSPT) for the sample period of January 2, 2006, to June 10, 2021.
Rt = μt + H0.5
t zt (1)
zt in Eq. (1) represents (2 × 1) vector of i.i.d. innovations. As discussed by Engle (2002), we can assume it bivariate normal, i.e.
zt~N(0, Ht). Htbeing the conditional covariance matrix in Eq. (1) can be segregated into a (2 × 2) diagonal matrix Dt consisting of
conditional correlation matrix Ct and conditional standard deviations h0.5 i, t with i ∈ {se, GI}:
Ht = Dt Ct Dt (2)
The univariate conditional mean is given in Eq. (3) based on the assumption that μi, t that is the conditional mean is equal to
( )
E Ri,t |F t− 1 when expressed as an autoregressive process of order four.
Table 4
Parameters estimated for Bahrain sectoral equity indexes using bivariate DCC-GARCH(1,1).
Mean Equation
ρ μ
CBOE SPX S&P GSCI S&P GSCI S&P GSCI CBOE SPX S&P GSCI S&P GSCI S&P GSCI
Volatility VIX Silver Spot Gold Spot Crude Oil Spot Volatility VIX Silver Spot Gold Spot Crude Oil Spot
Bahrain − 0.003*** 0.003 0.003 0.006*** 0.000 0.000 0.000 0.000

Market
Std. Error 0.001 0.003 0.005 0.002 0.000 0.000 0.000 0.000
Bahrain Banks − 0.004*** 0.003 0.001 0.010*** 0.000 0.000 0.000 0.000
Std. Error 0.001 0.004 0.001 0.004 0.000 0.000 0.000 0.000
Bahrain 0.001 0.000 − 0.028 0.005 0.000 0.000 0.000 0.000
Industrial
Std. Error 0.002 0.000 0.023 0.004 0.000 0.000 0.000 0.000
Bahrain Basic − 0.0150*** 0.003 − 0.001 0.000 0.000 0.000 0.000 0.000
Materials
Std. Error 0.003 0.002 0.003 0.000 0.000 0.000 0.000 0.000
Variance Equation
w1 w2
Bahrain 0.162*** 0.165*** 0.164*** 0.158*** 0.776*** 0.778*** 0.778*** 0.781***
Market
Std. Error 0.023 0.024 0.025 0.024 0.028 0.028 0.029 0.028
Bahrain Banks 0.156*** 0.156*** 0.158*** 0.150*** 0.787*** 0.789*** 0.786*** 0.794***
Std. Error 0.0375 0.039 0.039 0.037 0.0529 0.054 0.053 0.053
Bahrain 0.346*** 0.340*** 0.351*** 0.342*** 0.6895*** 0.693*** 0.694*** 0.694***
Industrial
Std. Error 0.0848 0.080 0.081 0.079 0.080 0.075 0.070 0.075
Bahrain Basic 0.872*** 0.341*** 0.341*** 1.865*** 0.711*** 0.737*** 0.736*** 0.481***
Materials
Std. Error 0.191 0.068 0.663 0.462 0.035 0.053 0.052 0.032
DCC Equation last part

α β
Bahrain 0.043*** 0.048*** 0.037*** 0.055*** 0.760*** 0.801*** 0.776*** 0.820***
Market
Std. Error 0.012 0.013 0.013 0.011 0.068 0.0423 0.035 0.038
Bahrain Banks 0.0468*** 0.033*** 0.031** 0.036*** 0.6987*** 0.811*** 0.795*** 0.848***
Std. Error 0.0144 0.013 0.013 0.009 0.0881 0.040 0.050 0.034
Bahrain 0.0121 0.035** 0.020 0.029 0.879*** 0.890*** 0.938*** 0.613**
Industrial
Std. Error 0.011 0.016 0.012 0.021 0.113 0.000 0.054 0.242
Bahrain Basic 0.008 0.038 0.019 0.024 0.877*** 0.872 0.939*** 0.730***
Materials
Std. Error 0.012 0.099 0.021 0.025 0.168 0.560 0.098 0.078
This table reports the estimated coefficients from a bivariate DCC-GARCH(1,1) model and the associated p-values of our sample of Bahrain sectors i.e.,
Bahrain Market (BHRALSH), Bahrain Banks (BHRABNK), Bahrain Industrial (BHRAIND) and Bahrain Basic Materials (BMATRBA) against global
indexes i.e., CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot (GSGCSPT) and S&P GSCI Crude Oil Spot
(GSCLSPT) for the sample period of January 2, 2006, to June 10, 2021. The results of mean equation, variance equation and DCC equation are
reported in part one, two and three of this table respectively. The 1, 5 and 10% levels of significance are denoted by ***, ** and *, respectively. All the
results of our post-estimation tests validate our main results. However, for the sake of brevity, we are not reporting them.
6
M.K. Hassan et al.
7

Fig. 1. Bahrain sectors correlation. The figure plots the pairwise DCC-GARCH(1,1) correlation in 5-day return i.e., Rt = ln(Pt) - ln (Pt-5) of major Bahrain sectors i.e., Bahrain Market (BHRALSH), Bahrain
Banks (BHRABNK), Bahrain Industrial (BHRAIND) and Bahrain Basic Materials (BMATRBA) in 100 trading day from July 8, 2008, to November 27, 2008 (representing the GFC) and January 1, 2020, to
May 19, 2020 (illustrating COVID-19) against global indexes i.e., CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot (GSGCSPT) and S&P GSCI Crude Oil Spot
(GSCLSPT). Each plot in this figure depicts the correlation between two series amid the GFC (in green) and COVID-19 (in red). As an example, the first top plot shows the correlation between Bahrain
Market (BHRALSH) and CBOE SPX Volatility VIX (CBOEVIX) in the GFC and the COVID-19 time. (For interpretation of the references to colour in this figure legend, the reader is referred to the web
version of this article.)
∑
4 ∑
4
Ri,t = μi + λp RGI,t− p + ρj Ri,t− j + ei,t (3)
p=1 j=1
where coefficient λi controls the potential Granger causality between the lagged GI return and the sectoral index return se. Unstan
dardized innovations with conditional variance hi, t and mean zero is represented by ei, t and is equal to h0.5
i, t zt. Following Bollerslev
( )
(1986) for estimating univariate conditional variances of sectoral and GI returns hi,t = Var Ri,t |F t− 1 through GARCH model:
∑n
hi,t = ωi,0 + ωi,1 e2i,t− 1 + j=1
ωi,1+j− 1 hi,t− j (4)
where each ω should satisfy the condition of ω > 0. Based on Qt (2 × 2) covariance matrix, we can state our conditional correlation as
follows.
Ct = (diagQt )− 0.5
Qt (diagQt )− 0.5
(5)
ei,t
To specify ut− 1 as (2 × 1) vector of standardized innovations with unconditional correlation matrix C, and ui,t = √̅̅̅̅̅, we follow the
hi,t
approach of Batten et al. (2017) and derive the matrix Qt in Eq. (6).
Qt = (1 − a − b)C + aut− 1 u′t− 1 + bQt− 1 (6)
The sum of positive scalers α and β is limited to under 1 (α + β < 1). We used Eq. (7) to calculate the conditional correlations from
the elements of the matrix Qt.
/( )0.5
ρse,GI,t = qse,GI,t qse,se,t qGI,GI,t (7)
( )
where qse, GI, t represents the conditional covariance qse,GI,t = Cov Rse,t , RGI,t |F t− 1 between sectoral index se and GI and qse,se,t =
( ) ( )
Var Rse,t |F t− 1 and qGI,GI,t = Var RGI,t |F t− 1 explain the conditional variances of sectoral index se and global index return GI,
respectively. Based on these estimates, we computed the bivariate DCC-GARCH (1,1) model for our baseline results.
3. Results
This section presents the DCC-GARCH(1,1) results for each GCC sectoral index in our sample against one global financial volatility
index (VIX) and three global commodity indexes (silver, gold and crude oil) from January 2, 2006, to June 10, 2021. Following Hassan
et al. (2021); Kinateder et al. (2021) this study calculates the DCC-GARCH(1,1) for each pair of indexes involved in this study. This
pairwise analysis allows us to gain a deeper understanding by examining the dynamic conditional correlations at the pair level instead
of analyzing the overall system as a whole. To elucidate the parameter estimates in our results, we plotted the correlations ρse,GI,t of
pairwise DCC-GARCH(1,1) for each GCC sectoral index from July 8. 2008 to November 27, 2008 (representing 100 trading days of the
GFC) and January 1, 2020, to May 19, 2020 (illustrating 100 days of the COVID-19 pandemic). As reported by Kinateder et al. (2021),
these 100 days during both crises were associated with the highest uncertainty and fear in financial markets. The green line in the plots
represents the GFC period while the COVID-19 pandemic is illustrated in red.
3.1. Bahrain sectoral equity indexes
The estimated parameters from a bivariate DCC-GARCH(1,1) model for Bahrain sectoral indexes against the global financial
volatility index (VIX) and three global commodity indexes (silver, gold and crude oil) are reported in Table 4. The first and second
parameters of the mean equation (ρ and μ) are generally insignificant for most of the pairs. Only VIX and crude oil indicate significant ρ
with some of Bahrain’s sectoral equity indexes. However, the results of the variance equation for all the correlated pairs in the table are
significant on both parameters (w1 and w2) even at a 1% level of significance. The results of the DCC equation on the other hand are
mixed though. All the pairs involving the Bahrain market index and banks index report significant coefficients of α and β. However,
Bahrain industrial index and basic materials index records some insignificant results on α. These parameter estimates confirm the time-
varying nature of conditional correlations of the Bahrain market index and banks index against the global indexes. However, the results
are less significant and mixed for the industrial index and basic materials index.
Fig. 1 visualizes the results reported in Table 4. The DCC correlations involving the Bahrain market index and banks index are quite
volatile however, the plots of the industrial index and basic materials index are generally static reflecting their insignificant co
efficients in Table 4. Starting with the global volatility index, the correlations of the Bahrain market index and banks index with VIX
mostly stay slightly below zero with frequent downward spikes. These plots depict the vulnerability of the market and banks indexes’
returns to the extreme financial uncertainty and volatility during a crisis and infer that their returns could possibly crumble as a result.
Hence, investors holding the Bahrain market index and banks index would require sanctuaries to offset this decline in their index
return. Albeit the plots of industrial index and basic materials index are largely static throughout the plot period except for some
downward movement during days 40–60 of the COVID-19 period. It mirrors the strength of these indexes to withstand the global
financial uncertainty and hold back their returns during both the GFC and COVID-19. The overall behavior of the Bahrain sectoral
indexes with VIX follows a similar pattern during both financial turmoils.
8
M.K. Hassan et al.
Table 5
Parameters estimated for Kuwait sectoral equity indexes using bivariate DCC-GARCH(1,1).
Mean Equation
ρ μ
CBOE SPX Volatility S&P GSCI Silver S&P GSCI Gold S&P GSCI Crude Oil CBOE SPX Volatility S&P GSCI Silver S&P GSCI Gold S&P GSCI Crude Oil
VIX Spot Spot Spot VIX Spot Spot Spot
Kuwait Banks − 0.008 0.020 0.035 0.010 0.000 0.000* 0.000* 0.000**
Std. Error 0.006 0.013 0.023 0.006 0.000 0.000 0.000 0.000
Kuwait Market − 0.006** 0.005 0.109 0.011** 0.000 0.000* 0.000 0.000*
Std. Error 0.003 0.005 0.118 0.005 0.000 0.000 0.000 0.000
Kuwait Industrial − 0.008*** 0.020*** 0.015 0.023*** 0.000 0.000 0.000 0.000
Std. Error 0.002 0.008 0.013 0.006 0.000 0.000 0.000 0.000
Kuwait − 0.007*** 0.009 0.183 0.014** 0.000 0.000 0.000 0.000
Investment
Std. Error 0.002 0.006 0.129 0.007 0.000 0.000 0.000 0.000
Variance Equation
w1 w2
Kuwait Banks 0.176*** 0.192*** 0.192*** 0.177*** 0.789*** 0.779*** 0.780*** 0.790***
Std. Error 0.023 0.024 0.026 0.024 0.029 0.026 0.028 0.026
Kuwait Market 0.180*** 0.189*** 0.189*** 0.184*** 0.790*** 0.785*** 0.784*** 0.788***
9
Std. Error 0.020 0.022 0.022 0.021 0.021 0.023 0.023 0.022
Kuwait Industrial 0.137*** 0.140*** 0.140*** 0.138 0.837*** 0.833*** 0.833*** 0.835***
Std. Error 0.019 0.020 0.020 0.020 0.023 0.024 0.024 0.024
Kuwait 0.131*** 0.134*** 0.135*** 0.131 0.845*** 0.842*** 0.842*** 0.844***
Investment
Std. Error 0.026 0.026 0.026 0.026 0.030 0.030 0.030 0.030
α β
Kuwait Banks 0.056*** 0.038* 0.026 0.041*** 0.755*** 0.784*** 0.760 0.854***
Std. Error 0.013 0.020 0.058 0.010 0.034 0.121 0.801 0.031

Kuwait Market 0.053*** 0.033** 0.028* 0.042*** 0.769*** 0.801*** 0.787*** 0.858***
Std. Error 0.013 0.016 0.016 0.010 0.036 0.092 0.164 0.030
Kuwait Industrial 0.048*** 0.022*** 0.023** 0.037*** 0.818*** 0.922*** 0.885*** 0.852***
Std. Error 0.012 0.006 0.009 0.009 0.032 0.018 0.040 0.029
Kuwait 0.040*** 0.025*** 0.025*** 0.043*** 0.824*** 0.884*** 0.854*** 0.855***
Investment
Std. Error 0.010 0.010 0.009 0.009 0.030 0.034 0.054 0.028
This table reports the estimated coefficients from a bivariate DCC-GARCH(1,1) model and the associated p-values of our sample of Kuwait sectors i.e., Kuwait Banks (KWALBNK), Kuwait Market
(KWALGEN), Kuwait Industrial (KWALIND) and Kuwait Investment (KWALINV) against global indexes i.e., CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot
(GSGCSPT) and S&P GSCI Crude Oil Spot (GSCLSPT) for the sample period of January 2, 2006, to June 10, 2021. The results of mean equation, variance equation and DCC equation are reported in part
one, two and three of this table respectively. The 1, 5 and 10% levels of significance are denoted by ***, ** and *, respectively. All the results of our post-estimation tests validate our main results. However,
for the sake of brevity, we are not reporting.
M.K. Hassan et al.
10

Fig. 2. Kuwait sectors correlation. The figure plots the pairwise DCC-GARCH(1,1) correlation in 5-day return i.e., Rt = ln(Pt) - ln (Pt-5) of major Kuwait sectors i.e., Kuwait Banks (KWALBNK), Kuwait
Market (KWALGEN), Kuwait Industrial (KWALIND) and Kuwait Investment (KWALINV) in 100 trading day from July 8, 2008, to November 27, 2008 (representing the GFC) and January 1, 2020, to May
19, 2020 (illustrating COVID-19) against global indexes i.e., CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot (GSGCSPT) and S&P GSCI Crude Oil Spot
(GSCLSPT). Each plot in this figure depicts the correlation between two series amid the GFC (in green) and COVID-19 (in red). As an example, the first top plot shows the correlation between Kuwait
Banks (KWALBNK) and CBOE SPX Volatility VIX (CBOEVIX) in the GFC and the COVID-19 time. (For interpretation of the references to colour in this figure legend, the reader is referred to the web
Moving on to the global commodity indexes, their correlations with the Bahrain market index and banks index demonstrate sig
nificant volatility. During the initial 20 days into each financial turmoil, correlations are comparatively low in COVID-19 (red line) and
mostly travel below the zero mark. However, from day 20 to day 70, the COVID-19 line remains above the GFC line. Additionally, days
40–60 of the COVID-19 pandemic are associated with a sharp upward spike in all the plots and correlations jump beyond the 0.5 mark.
Hence, the three global commodity indexes silver, gold, crude oil, in reality, enhanced the portfolio risk of investors who held those
together with the Bahrain market index and banks index particularly during the days 20–70 of COVID-19. Towards the last quarter of
the plots i.e., days 80–100, the COVID-19 lines again fall below the GFC line but still, the correlations remain positive except for the
gold where both lines touch zero mark eventually. Analyzing all these plots together, it can be inferred that global commodity indexes
served as good safe havens only during the early 20 days of COVID-19. Later on, they either behave more like risky than safe assets or
serve as weak safe havens only for very short periods. Similar to their behavior towards VIX, the industrial index and basic materials
Table 6
Parameters estimated for Oman sectoral equity indexes using bivariate DCC-GARCH(1,1).
Mean Equation
ρ μ
Oman 0.000 0.013 0.055 0.009 0.000 0.000 0.000 0.000

Consumer
Staples
Std. Error 0.001 0.009 0.004 0.007 0.000 0.000 0.000 0.000
Oman − 0.003*** 0.013*** 0.014* 0.012*** 0.000 0.000 0.000 0.000
Industrials
Std. Error 0.001 0.004 0.008 0.005 0.000 0.000 0.000 0.000
Oman Market − 0.005*** 0.012*** 0.011* 0.011** 0.000 0.000 0.000 0.000
Std. Error 0.001 0.003 0.006 0.004 0.000 0.000 0.000 0.000
Oman Banks − 0.007*** 0.013*** 0.012* 0.017*** 0.000 0.000 0.000 0.000
Std. Error 0.001 0.004 0.007 0.005 0.000 0.000 0.000 0.000
Variance Equation
w1 w2
Oman 0.203*** 0.206*** 0.374*** 0.204*** 0.801*** 0.801*** 0.729*** 0.803***
Consumer
Staples
Std. Error 0.044 0.045 0.050 0.043 0.043 0.043 0.027 0.413
Oman 0.206*** 0.211*** 0.210*** 0.206*** 0.764*** 0.760*** 0.763*** 0.764***
Industrials
Std. Error 0.030 0.030 0.030 0.031 0.028 0.027 0.270 0.028
Oman Market 0.184*** 0.184*** 0.184*** 0.164*** 0.802*** 0.801*** 0.801*** 0.820***
Std. Error 0.025 0.024 0.024 0.025 0.024 0.023 0.023 0.026
Oman Banks 0.200*** 0.201*** 0.202*** 0.190*** 0.794*** 0.794*** 0.793*** 0.802***
Std. Error 0.026 0.026 0.026 0.025 0.243 0.024 0.024 0.024
DCC Equation
α β
Oman 0.030** 0.021** 0.032** 0.054*** 0.870*** 0.907*** 0.783*** 0.810***
Consumer
Staples
Std. Error 0.015 0.009 0.013 0.013 0.088 0.046 0.102 0.040
Oman 0.027** 0.040*** 0.049*** 0.034*** 0.856*** 0.817*** 0.819*** 0.863***
Industrials
Std. Error 0.014 0.011 0.013 0.009 0.103 0.037 0.038 0.029
Oman Market 0.033** 0.047*** 0.038*** 0.057*** 0.901*** 0.795*** 0.780*** 0.808***
Std. Error 0.013 0.011 0.011 0.013 0.060 0.036 0.039 0.045
Oman Banks 0.025*** 0.038*** 0.045*** 0.051*** 0.920*** 0.853*** 0.809*** 0.783***
Std. Error 0.008 0.009 0.012 0.012 0.032 0.025 0.044 0.038
This table reports the estimated coefficients from a bivariate DCC-GARCH(1,1) model and the associated p-values of our sample of Oman sectors i.e.,
Oman Consumer Staples (COSTPOM), Oman Industrials (INDUSOM), Oman Market (TOTXROM) and Oman Banks (X4OMBKL) against global indexes
i.e., CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot (GSGCSPT) and S&P GSCI Crude Oil Spot (GSCLSPT)
for the sample period of January 2, 2006, to June 10, 2021. The results of mean equation, variance equation and DCC equation are reported in part
one, two and three of this table. The 1, 5 and 10% levels of significance are denoted by ***, ** and *, respectively. All the results of our post-estimation
tests validate our main results. However, for the sake of brevity, we are not reporting them.
11
M.K. Hassan et al.
12

Fig. 3. Oman sectors correlation. The figure plots the pairwise DCC-GARCH(1,1) correlation in 5-day return i.e., Rt = ln(Pt) - ln (Pt-5) of major Oman sectors i.e., Oman Consumer Staples (COSTPOM),
Oman Industrials (INDUSOM), Oman Market (TOTXROM) and Oman Banks (X4OMBKL) in 100 trading day from July 8, 2008, to November 27, 2008 (representing the GFC) and January 1, 2020, to
(GSCLSPT). Each plot in this figure depicts the correlation between two series amid the GFC (in green) and COVID-19 (in red). As an example, the first top plot shows the correlation between Oman
Consumer Staples (COSTPOM) and CBOE SPX Volatility VIX (CBOEVIX) in the GFC and the COVID-19 time. (For interpretation of the references to colour in this figure legend, the reader is referred to
the web version of this article.)
index generally remain stagnant against global commodity indexes. Although the industrial index and basic materials index also show
an upward spike during the days 40–60 of COVID-19 but overall, correlations stay very close to zero. Hence, global commodity indexes
served as weak safe havens for the Industrial index and basic materials index during both the GFC and the COVID-19 pandemic.
3.2. Kuwait sectoral equity indexes
Table 5 presents the estimated parameters from a bivariate DCC-GARCH(1,1) model for the Kuwait sectoral equity indexes against
the global financial risk index (VIX) and three global commodity indexes (silver, gold and crude oil). Similar to the results of Bahrain
indexes, the first and second parameters of the mean equation (ρ and μ) for Kuwait indexes are mostly insignificant for most of the
pairs. The results of w1 and w2 (variance equation parameters) are significant even at 1% level except for the crude oil that reports
insignificant w1 with Kuwait industrial and Kuwait banks. Lastly, the coefficients of α and β (the two parameters of DCC equation) are
significant for all the Kuwait sectoral equity indexes except for the gold that registers insignificant α with the Kuwait banks and Kuwait
market. The overall results indicate the time-varying nature of conditional correlations between the Kuwait sectoral indexes and global
indexes.
The pairwise DCC-GARCH(1,1) correlations ρse,GI,t for each Kuwait sectoral index are plotted in Fig. 2 that graphically illustrate the
results presented in Table 5. Starting with VIX, its correlations with all the Kuwait sectoral indexes during COVID-19 are comparatively
more volatile. But generally, both the GFC and the COVID-19 lines remain below zero during most of the period. It infers that when
financial uncertainty in the market surges, Kuwait’s sectoral indexes returns start plummeting. To examine whether this fall in indexes
returns can be neutralized by virtue of holding gold, silver or crude oil, their DCC correlations plots are illustrated in columns 2,3 and 4
respectively.
The behavior of Kuwait sectoral indexes towards silver and gold exhibits several similarities. For example, during the starting 40
days, both the GFC and the COVID-19 lines move very close to each other and fluctuate slightly above zero. Throughout days 40–60,
both lines cover an upward journey. Similar to what we found for Bahrain sectoral indexes, the COVID-19 lines during this middle
phase again display a sharp upward spike touching 0.6 in some cases. Towards the end of the plots, both lines follow descending path
nevertheless, correlations stay positive. But unlike silver that never resulted in negative correlations, gold exhibited some refuge
characteristics during the early period of the COVID-19 pandemic. Except for this short COVID-19 period, silver and gold failed to
provide safety nets for Kuwait sectoral indexes during both financial turmoils. The correlations of crude oil portray similar correlation
patterns with all the Kuwait sectoral indexes. During the first 20 days, the COVID-19 and the GFC lines travel in the opposite direction.
Crude oil demonstrated its safe have capability during these days in the case of COVID-19. However, from day 20 onwards, correlations
for COVID-19 mostly stay over the GFC line. Furthermore, the 40–60 days period during COVID-19 induces the same unusually high
correlations in the case of crude oil as well. Apart from the early 20 days during COVID-19, crude oil behaved like a risky asset and
couldn’t offer sanctuary capabilities to investors holding Kuwait sectoral indexes.
3.3. Oman sectoral equity indexes
Table 6 records the estimated parameters from a bivariate DCC-GARCH(1,1) model for Oman sectoral equity indexes against the
global financial volatility index (VIX) and three global commodity indexes (silver, gold and crude oil). The coefficients of ρ (mean
equation parameter) are significant for all the Oman sectoral indexes except for the consumer staple index. Similarly, μ (mean equation
parameter), both w1 and w2 (variance equation parameters) and α and β (DCC equation parameters) are significant (mostly at 1%
level) for each correlated pair in Table 6. These results confirm the time-varying nature of conditional correlations between Oman
sectoral indexes and global indexes.
To graphically illustrate the results reported in Table 6, pairwise DCC-GARCH(1,1) correlations ρse,GI,t for each Oman sectoral index
are plotted in Fig. 3. Comparing the correlations of Oman sectoral indexes with VIX, it is evident that both the GFC and the COVID-19
lines start around the zero mark but gradually slide and mostly stay below zero with some random spikes. From this, it is reasonable to
deduce that intense volatility during a financial turmoil could pull the return of Oman sectoral indexes back. To analyze whether silver,
gold and crude oil could potentially offset this slump in the return, their DCC correlations with Oman sectoral indexes are plotted in
columns 2, 3 and 4 respectively. Beginning with silver, its correlations with the consumer staples index are least volatile and generally
stay closer to the zero mark. Especially during the COVID-19, they remain slightly negative for most of the plot period endorsing the
safe haven properties of silver. However, this property is comparatively weaker in the case of the GFC particularly during the last half
of the plot. For the rest of the three Oman sectoral indexes, correlations during both the GFC and COVID-19 stay above zero. Both lines
intersect each other multiple times with some random spikes but failed to indicate any safe haven capabilities.
Similar to its correlation with silver, the consumer staples index depicts comparatively lesser volatile correlations with gold and
exhibits weak safe haven ability during both the GFC and COVID-19. For the remaining three Oman sectoral indexes, this property is
merely evident during the first 5 to 10 days into both crises. Subsequently, both the GFC and the COVID-19 lines rise lifting the
correlations above zero. During days 60–90, the green line drops below zero that once again reinstates the capability of gold to
safeguard investors during financial crises. Lastly, crude oil similar to other global commodity indexes illustrates weak safe haven
capability for consumer staple index during most of the COVID-19 period. However, for the other three Oman indexes, this hedging
ability is limited to some initial days of the COVID-19 pandemic only.
13
3.4. Qatar sectoral equity indexes
The estimated parameters from a bivariate DCC-GARCH(1,1) model for Qatar sectoral indexes against the global financial volatility
index (VIX) and three global commodity indexes (silver, gold and crude oil) are given in the Table 7. The results of ρ are significant for
most of the correlated pairs in the table except for gold against consumer staples index and industrials index. However, the coefficients
of μ are significant for the Qatar market only against all the global indexes. Both w1 and w2 (variance equation parameters) and α and β
(DCC equation parameters) are significant (mostly at 1% level) for each correlated pair in Table 7. These results support the time-
varying nature of pairwise DCC-GARCH(1,1) correlations ρse,GI,t between Qatar sectoral indexes and global indexes and are
Table 7
Parameters estimated for Qatar sectoral equity indexes using bivariate DCC-GARCH(1,1).
Mean Equation
ρ μ
Qatar − 0.008*** 0.009 0.010 0.010* 0.000 0.000 0.000 0.000

Consumer
Staples
Std. Error 0.002 0.006 0.011 0.005 0.000 0.000 0.000 0.000
Qatar − 0.018*** 0.014*** 0.018 0.039*** 0.000 0.000 0.000 0.000
Industrials
Std. Error 0.0023 0.005 0.011 0.008 0.000 0.000 0.000 0.000
Qatar Market − 0.012*** 0.016*** 0.026*** 0.035*** 0.000* 0.000** 0.000** 0.000*
Std. Error 0.002 0.004 0.008 0.005 0.000 0.000 0.000 0.000
Qatar − 0.011*** 0.118*** 0.020** 0.031*** 0.000 0.000 0.000 0.000
Financials
Std. Error 0.002 0.004 0.008 0.005 0.000 0.000 0.000 0.000
Variance Equation
w1 w2
Qatar 0.207*** 0.210*** 0.210*** 0.207*** 0.782*** 0.779*** 0.779*** 0.781***
Consumer
Staples
Std. Error 0.032 0.033 0.033 0.033 0.031 0.032 0.032 0.032
Qatar 0.149*** 0.179*** 0.151*** 0.155*** 0.840*** 0.810*** 0.839*** 0.834***
Industrials
Std. Error 0.023 0.021 0.024 0.026 0.024 0.021 0.025 0.027
Qatar Market 0.134*** 0.138*** 0.137*** 0.138*** 0.785*** 0.875*** 0.876*** 0.876***
Std. Error 0.035 0.035 0.035 0.037 0.013 0.035 0.035 0.036
Qatar 0.203*** 0.214*** 0.209*** 0.208*** 0.803*** 0.795*** 0.799*** 0.800***
Financials
Std. Error 0.021 0.020 0.021 0.020 0.017 0.017 0.017 0.017
DCC Equation
α β
Qatar 0.059*** 0.028** 0.027** 0.047*** 0.767*** 0.841*** 0.800*** 0.820***
Consumer
Staples
Std. Error 0.013 0.011 0.011 0.011 0.054 0.042 0.042 0.032
Qatar 0.045*** 0.027*** 0.028** 0.033*** 0.846*** 0.834*** 0.871*** 0.884***
Industrials
Std. Error 0.011 0.010 0.011 0.010 0.041 0.047 0.088 0.0290
Qatar Market 0.035* 0.039*** 0.041*** 0.041*** 0.899*** 0.806*** 0.842*** 0.828***
Std. Error 0.020 0.012 0.010 0.010 0.091 0.047 0.040 0.010
Qatar 0.033*** 0.041*** 0.038*** 0.045*** 0.881*** 0.801*** 0.819*** 0.777***
Financials
Std. Error 0.010 0.011 0.011 0.011 0.048 0.033 0.039 0.049
This table reports the estimated coefficients from a bivariate DCC-GARCH(1,1) model and the associated p-values of our sample of Qatar sectors i.e.,
Qatar Consumer Staples (COSTPQA), Qatar Industrials (INDUSQA), Qatar Market (TOTMKQA) and Qatar Financials (X1QAFNL) against global in
dexes i.e., CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot (GSGCSPT) and S&P GSCI Crude Oil Spot
(GSCLSPT) for the sample period of January 2, 2006, to June 10, 2021. The results of mean equation, variance equation and DCC equation are
reported in part one, two and three of this table respectively. The 1, 5 and 10% levels of significance are denoted by ***, ** and *, respectively. All the
results of our post-estimation tests validate our main results. However, for the sake of brevity, we are not reporting them.
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Fig. 4. Qatar sectors correlation. The figure plots the pairwise DCC-GARCH(1,1) correlation in 5-day return i.e., Rt = ln(Pt) - ln (Pt-5) of major Qatar sectors i.e., Qatar Consumer Staples (COSTPQA),
Qatar Industrials (INDUSQA), Qatar Market (TOTMKQA) and Qatar Financials (X1QAFNL) in 100 trading day from July 8, 2008, to November 27, 2008 (representing the GFC) and January 1, 2020, to
(GSCLSPT). Each plot in this figure depicts the correlation between two series amid the GFC (in green) and COVID-19 (in red). As an example, the first top plot shows the correlation between Qatar
Consumer Staples (COSTPQA) and CBOE SPX Volatility VIX (CBOEVIX) in the GFC and the COVID-19 time. (For interpretation of the references to colour in this figure legend, the reader is referred to
the web version of this article.)
visualized in Fig. 4.
The plots of DCC correlations involving VIX and each Qatar sectoral index (in the first column) start around the zero mark but both
lines eventually move downward indicating negative correlations for most of the period. Hence, similar to the findings for other GCC
countries, Qatar sectoral indexes returns are also susceptible to dwindle when financial uncertainty in the market intensifies during a
financial turmoil. The findings imply that investors holding Qatar stock indexes would be compelled to search for some sanctuaries if
Table 8
Parameters estimated for Saudi Arabia sectoral equity indexes using bivariate DCC-GARCH(1,1).
Mean Equation
ρ μ
Saudi Arab − 0.011*** 0.009* 0.020** 0.0261*** 0.000*** 0.000** 0.000** 0.000**
Market
Std. Error 0.002 0.005 0.009 0.006 0.000 0.000 0.000 0.000
Saudi Arab − 0.011*** 0.006 0.014 0.023*** 0.000 0.000 0.000 0.000
Financials
Std. Error 0.002 0.005 0.010 0.007 0.000 0.000 0.000 0.000
Saudi Arab − 0.007*** 0.008 0.020** 0.017*** 0.000 0.000 0.000 0.000
Industrials
Std. Error 0.002 0.005 0.010 0.006 0.000 0.000 0.000 0.000
Saudi Arab − 0.153*** 0.017*** 0.023* 0.039*** 0.000*** 0.000*** 0.000*** 0.000**
Basic
Materials
Std. Error 0.023 0.007 0.012 0.008 0.000 0.000 0.000 0.000
Variance Equation
w1 w2
Saudi Arab 0.180*** 0.173*** 0.172*** 0.169*** 0.818*** 0.820*** 0.822*** 0.824***
Market
Std. Error 0.019 0.020 0.020 0.019 0.019 0.018 0.017 0.017
Saudi Arab 0.181*** 0.178*** 0.178*** 0.173*** 0.810*** 0.813*** 0.813*** 0.816***
Financials
Std. Error 0.021 0.021 0.021 0.021 0.019 0.019 0.019 0.190
Saudi Arab 0.196*** 0.202*** 0.201*** 0.199*** 0.801*** 0.794*** 0.795*** 0.796***
Industrials
Std. Error 0.021 0.022 0.021 0.022 0.018 0.019 0.018 0.019
Saudi Arab 0.167*** 0.161*** 0.161*** 0.160*** 0.828*** 0.830*** 0.831*** 0.829***
Basic
Materials
Std. Error 0.021 0.022 0.022 0.023 0.019 0.021 0.021 0.023
DCC Equation
α β
Saudi Arab 0.045*** 0.039*** 0.028** 0.053*** 0.846*** 0.845*** 0.877*** 0.849***
Market
Std. Error 0.011 0.013 0.012 0.010 0.024 0.066 0.080 0.032
Saudi Arab 0.040*** 0.043*** 0.027*** 0.042*** 0.840*** 0.816*** 0.867*** 0.854***
Financials
Std. Error 0.012 0.012 0.010 0.009 0.028 0.060 0.058 0.030
Saudi Arab 0.065*** 0.025** 0.023** 0.046*** 0.816*** 0.836*** 0.816*** 0.845***
Industrials
Std. Error 0.011 0.010 0.010 0.009 0.028 0.063 0.047 0.027
Saudi Arab 0.040** 0.033*** 0.033*** 0.045*** 0.894*** 0.879*** 0.885*** 0.879***
Basic
Materials
Std. Error 0.016 0.013 0.010 0.008 0.058 0.067 0.044 0.022
This table reports the estimated coefficients from a bivariate DCC-GARCH(1,1) model and the associated p-values of our sample of Saudi Arabia
sectors i.e., Saudi Arab Market (TOTMKSI), Saudi Arab Financials (FINANSI), Saudi Arab Industrials (INDUSSI) and Saudi Arab Basic Materials
(BMATRSI) against global indexes i.e., CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot (GSGCSPT) and
S&P GSCI Crude Oil Spot (GSCLSPT) for the sample period of January 2, 2006, to June 10, 2021. The results of mean equation, variance equation and
DCC equation are reported in part one, two and three of this table respectively. The 1, 5 and 10% levels of significance are denoted by ***, ** and *,
respectively. All the results of our post-estimation tests validate our main results. However, for the sake of brevity, we are not reporting them.
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Fig. 5. Saudi Arabia sectors correlation. The figure plots the pairwise DCC-GARCH(1,1) correlation in 5-day return i.e., Rt = ln(Pt) - ln (Pt-5) of major Saudi Arabia sectors i.e., Saudi Arab Market
(TOTMKSI), Saudi Arab Financials (FINANSI), Saudi Arab Industrials (INDUSSI) and Saudi Arab Basic Materials (BMATRSI) in 100 trading day from July 8, 2008, to November 27, 2008 (representing
the GFC) and January 1, 2020, to May 19, 2020 (illustrating COVID-19) against global indexes i.e., CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot
(GSGCSPT) and S&P GSCI Crude Oil Spot (GSCLSPT). Each plot in this figure depicts the correlation between two series amid the GFC (in green) and COVID-19 (in red). As an example, the first top plot
shows the correlation between Saudi Arab Market (TOTMKSI) and CBOE SPX Volatility VIX (CBOEVIX) in the GFC and the COVID-19 time. (For interpretation of the references to colour in this figure
legend, the reader is referred to the web version of this article.)
they want to shelter their returns. To verify whether silver, gold and crude oil could serve as safe havens, their DCC correlations with
Qatar sectoral indexes are plotted in columns 2, 3 and 4 respectively. The plots of silver against the consumer staples index are
comparatively less volatile than the other three sectoral indexes. However, the correlations in all four plots generally stay above zero
throughout plots. The GFC line comes below zero around day 35 in the case of the industrial index, market index and financial index
but it instantaneously jumps upward and fluctuates above zero. Hence, silver is not a good choice if investors holding Qatar stock
indexes want to secure their returns during a financial turmoil.
The overall results of DCC correlations against gold are quite encouraging for the investors as the plots during both the GFC and
COVID-19 either stay at zero or slightly below zero during most of the period. In the early 40 days, the GFC line mostly stays above the
Table 9
Parameters estimated for UAE sectoral equity indexes using bivariate DCC-GARCH(1,1).
Mean Equation
ρ μ
UAE. 0.010*** 0.013*** 0.020** 0.020*** 0.000 0.000 0.000 0.000

Financials
Std. Error 0.002 0.004 0.010 0.005 0.000 0.000 0.000 0.000
UAE. − 0.009 0.020** 0.007 0.016* 0.000 0.000 0.000 0.000
Consumer
Staples
Std. Error 0.002 0.009 0.016 0.009 0.000 0.000 0.000 0.000
UAE. − 0.014*** 0.019*** 0.034*** 0.011* 0.000 0.000 0.000 0.000
Industrials
Std. Error 0.002 0.007 0.013 0.007 0.000 0.000 0.000 0.000
UAE. Market − 0.010*** 0.017*** 0.026*** 0.018*** 0.000 0.000 0.000 0.000
Std. Error 0.001 0.005 0.009 0.004 0.000 0.000 0.000 0.000
Variance Equation
w1 w2
UAE. 0.176*** 0.202*** 0.175*** 0.172*** 0.813*** 0.788*** 0.812*** 0.814***
Financials
Std. Error 0.026 0.022 0.026 0.026 0.026 0.021 0.026 0.026
UAE. 0.264*** 0.267*** 0.266*** 0.265*** 0.725*** 0.724*** 0.725***
Consumer
Staples
0.726***
Std. Error 0.034 0.033 0.033 0.033 0.031 0.030 0.030 0.305
UAE. 0.168*** 0.173*** 0.174*** 0.172*** 0.810*** 0.803*** 0.804*** 0.804***
Industrials
Std. Error 0.018 0.019 0.019 0.019 0.018 0.019 0.019 0.020
UAE. Market 0.196*** 0.194*** 0.194*** 0.192*** 0.796*** 0.796*** 0.797*** 0.797***
Std. Error 0.025 0.026 0.026 0.025 0.023 0.024 0.024 0.024
DCC Equation
α β
UAE. 0.043*** 0.029*** 0.039*** 0.050*** 0.860*** 0.850*** 0.826*** 0.827***
Financials
Std. Error 0.010 0.010 0.011 0.010 0.033 0.047 0.048 0.017
UAE. 0.040*** 0.041*** 0.017** 0.021*** 0.834*** 0.781*** 0.945*** 0.936***
Consumer
Staples
Std. Error 0.011 0.013 0.007 0.007 0.025 0.036 0.024 0.023
UAE. 0.032*** 0.022*** 0.030*** 0.031*** 0.849*** 0.881*** 0.866*** 0.841***
Industrials
Std. Error 0.010 0.008 0.010 0.009 0.026 0.036 0.049 0.018
UAE. Market 0.039*** 0.022* 0.035*** 0.051*** 0.846*** 0.857*** 0.803*** 0.819***
Std. Error 0.010 0.012 0.012 0.010 0.027 0.084 0.054 0.019
This table reports the estimated coefficients from a bivariate DCC-GARCH(1,1) model and the associated p-values of our sample of UAE sectors i.e.,
UAE. Financials (FINANAE), UAE. Consumer Staples (COSTPAE), UAE. Industrials (INDUSAE) and UAE. Market (TOTMKAE) against global indexes i.
e., CBOE SPX Volatility VIX (CBOEVIX), S&P GSCI Silver Spot (GSSISPT), S&P GSCI Gold Spot (GSGCSPT) and S&P GSCI Crude Oil Spot (GSCLSPT)
for the sample period of January 2, 2006, to June 10, 2021. The results of mean equation, variance equation and DCC equation are reported in part
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M.K. Hassan et al.
19

Fig. 6. UAE sectors correlation. The figure plots the pairwise DCC-GARCH(1,1) correlation in 5-day return i.e., Rt = ln(Pt) - ln (Pt-5) of major UAE sectors i.e., UAE. Financials (FINANAE), UAE.
Consumer Staples (COSTPAE), UAE. Industrials (INDUSAE) and UAE. Market (TOTMKAE) in 100 trading day from July 8, 2008, to November 27, 2008 (representing the GFC) and January 1, 2020, to
(GSCLSPT). Each plot in this figure depicts the correlation between two series amid the GFC (in green) and COVID-19 (in red). As an example, the first top plot shows the correlation between UAE.
Financials (FINANAE) and CBOE SPX Volatility VIX (CBOEVIX) in the GFC and the COVID-19 time. (For interpretation of the references to colour in this figure legend, the reader is referred to the web
COVID-19 line. However, from day 40 onwards, the correlations are comparatively lower during the GFC. From these plots, it can be
concluded that gold served as a safe haven during both financial crises albeit with higher effectiveness during the early phase of the
COVID-19 pandemic and later period of the GFC. The plots of crude oil against the Qatar sectoral indexes indicate that correlations
mostly remain too high to offer any shelter from the adversities of financial turmoil. During the initial 5 to 10 days, correlations are
comparatively lower for COVID-19. Later on, these correlations keep on rising and even jump above 0.5 during the 40–60 days period.
Towards the end, the COVID-19 line again falls and comes closer to the zero mark. Overall, crude oil cannot be trusted as a safe haven
when held in a portfolio with Qatar sectoral indexes.
3.5. Saudi Arab sectoral equity indexes
The estimated parameters from a bivariate DCC-GARCH(1,1) model for Saudi sectoral equity indexes against the global financial
volatility index (VIX) and three global commodity indexes (silver, gold and crude oil) are reported in Table 8. Results are mixed for
both parameters of the mean equation. VIX and crude oil exhibit significant ρ with each Saudi sectoral index. Silver reports significant ρ
with basic materials index and market index whereas gold results in significant ρ with all sectoral indexes except financials index. The
results of the second parameter (μ) are significant for each global index against market index and basic materials index. Both w1 and
w2 (variance equation parameters) and α and β (DCC equation parameters) are significant (mostly at 1% level) for each Saudi sectoral
index against all global indexes used in this study. These results establish the time-varying nature of DCC-GARCH(1,1) correlations ρse,
GI,t for each correlated pair in Table 8 and are elucidated graphically in Fig. 5.
The correlations of VIX with all the Saudi sectoral indexes in the first column reflect how vulnerable their returns are to financial
uncertainty in global markets. The plots commence near the zero correlation mark but both lines sink and even come closer to − 0.5 for
some indexes. Negative correlations of this magnitude substantiate their extreme susceptibility to crash during times of peak financial
uncertainty and volatility. Investment in Saudi sectoral indexes would certainly need safe havens to offset their negative returns.
After examining the correlation plots of silver with Saudi sectoral indexes in column 2, it is evident that at the start, both the GFC
and the COVID-19 lines were close to zero mark but they gradually start to rise upward. The COVID-19 line generally remains below
the GFC line during the initial 50 days. Hereafter, it either stays above the GFC line or stays very close to it. Overall, correlations remain
above zero mark denying the safe haven capability of silver to shield returns in Saudi sectoral indexes. The plots in the third column
portray that correlations of gold with Saudi sectoral indexes mostly fluctuate around zero mark. In the early 50 days, the COVID-19 line
is slightly below the GFC line but later on, it climbs and largely stays on top of the GFC line. In comparison to the COVID-19 line,
correlations during the GFC are less volatile and rest closer to zero. Hence, generally, gold served as a sanctuary for the initial 50 days
of COVID-19 but its hedging capability weakened during the last 50 days of the pandemic. In the case of the GFC, gold can be
considered as a weak safe haven and its performance is consistent throughout the plot. The correlations in plots of crude oil with Saudi
sectoral indexes are positive throughout the period during both the GFC and COVID-19. Only the Saudi Arab industrial index depicts
negative correlations at the beginning of the COVID-19 pandemic for a very brief period. The characteristic upward spike during day
40–60 of the COVID-19 pandemic is also evident in all four plots where correlations go beyond 0.5. Based on these plots, we can safely
conclude that crude oil works more like a risky than a safe asset to safeguard investments in Saudi sectoral indexes during a financial
crisis.
3.6. UAE sectoral equity indexes
The estimated parameters from a bivariate DCC-GARCH(1,1) model for UAE sectoral equity indexes against the global financial
volatility index (VIX) and three global commodity indexes (silver, gold and crude oil) are presented in Table 9. Results of the first
parameter of mean equation (ρ) are mixed. Silver and crude oil report significant ρ with all the UAE sectoral indexes albeit few at 10%
level. The results are also significant for VIX and gold against each UAE sectoral index except the consumer index. Conversely, the other
parameter μ, is insignificant for all the combinations of UAE sectoral indexes and global indexes. Both w1 and w2 (variance equation
parameters) and α and β (DCC equation parameters) are significant (mostly at 1% level) for each correlated pair in Table 9. These
results validate the time-varying nature of DCC correlations between UAE sectoral indexes and global indexes. Fig. 6 graphically il
lustrates these DCC-GARCH(1,1) correlations ρse,GI,t for each pair.
The first column plots the correlations between VIX and UAE sectoral indexes. The correlations that were closer to zero at the
beginning continue their downward trek throughout the plots. During the early 50 days, the correlations are comparatively more
negative for COVID-19 indicating that UAE sectoral index returns plunged more speedily in the early 50 days during COVID-19
compared to the GFC. As observed for other GCC countries, UAE sectoral indexes returns are also sensitive to the level of financial
uncertainty in global markets. Hence, returns of these indexes could slump if volatility in financial markets crisis escalates during a
financial.
The correlations between silver and UAE sectoral indexes plotted in the second column indicate that both the GFC and the COVID-
19 lines stay above the zero mark aside from very brief downward spikes in the case of the consumer staple index. All these graphs
exhibit some other similarities as well. Until day 40, the COVID-19 line fluctuates below the GFC line. However, towards the last half
part, both lines swap their positions. Hence, silver failed in providing shelter to investments in UAE sectoral indexes during both
pandemics. The results of Gold against the UAE sectoral indexes are mixed. Gold behaved like a weak safe haven for consumer staple
during both pandemics and correlations are comparatively stable throughout the period. For the remaining three sectors, gold
exhibited weak safe haven properties in the case of COVID-19 during the first 50 days and in the GFC during the last 50 days. The plots
of crude oil in column four illustrate that correlations remain very high throughout the crises period except for brief moments of relief
20
when correlations dip below zero. Consequently, it is reasonable to conclude that crude oil would be a deleterious choice to offset the
decline in UAE sectoral index returns during a financial turmoil.
3.7. Robustness tests
To ensure that our results are robust to the selection of model estimation technique, we re-estimated all the correlations using
GARCH (1,1) model. The results of GARCH (1,1) model corroborated the DCC-GARCH correlations reported in this study. However,
given the number of correlations involved and for the sake of brevity, they have not been reported.
4. Conclusion and policy implications
This study compares the refuge characteristics of gold, silver and crude oil during two financial turmoils- the GFC and the COVID-
19 pandemic for major sectoral equity indexes in GCC countries i.e., Bahrain (Bahrain market, Bahrain banks, Bahrain industrial and
Bahrain basic materials), Kuwait (Kuwait banks, Kuwait market, Kuwait industrial and Kuwait investment), Oman (Oman consumer
staples, Oman industrials, Oman market and Oman banks), Qatar (Qatar consumer staples, Qatar industrials, Qatar market and Qatar
financials), Saudi Arab (Saudi Arab market, Saudi Arab financials, Saudi Arab industrials and Saudi Arab basic materials) and UAE
(UAE. financials, UAE. consumer staples, UAE. industrials and UAE. Market). In addition, the study also gauges the resilience and
vulnerability of their indexes’ returns to the rise in global financial volatility during a financial crisis.
Starting from Bahrain, we found that all the global commodity indexes i.e., gold, silver and crude oil, at best, are weak safe havens
for the Bahrain industrials index and Bahrain basic materials index during both COVID-19 and the GFC. Except for similar short-lived
early sanctuary for the Kuwait sectoral indexes during the COVID-19 period, all the global commodities failed in safeguarding investors
from the adversities of both financial crises. Silver was found effective in hedging the Oman consumer staple index but only during the
COVID-19 pandemic and this property was comparatively weaker in the case of the GFC particularly during the last half of the plot.
Gold on the other hand was an effective refugee for the Oman consumer staple index during both financial crises. For the other three
Oman sectoral equity indexes, this property is evident during the first 5 to 10 days into both crises or during the days 60–90 of the GFC.
Lastly, crude oil confirms the weak to moderate safe haven properties for the consumer staple index during most of the COVID-19
period. However, for the other three Oman indexes, this capability is limited to the initial few days of the COVID-19 pandemic only.
The overall results of DCC correlations between gold and each of Qatar’s sectoral equity index are encouraging for the investors as
they exhibit strong safe haven capability during both the GFC and the COVID-19 pandemic. However, gold was found comparatively
more effective in offsetting the negative sectoral index returns during the early phase of the COVID-19 pandemic and later period of the
GFC. Overall, silver and crude oil cannot be considered safe haven assets when held in a portfolio with Qatar sectoral equity indexes.
When correlated with Saudi sectoral equity indexes, gold served as a good safe haven during the early 50 days of COVID-19 but its
hedging capability weakened during the last 50 days. In the case of the GFC, gold can be considered as a weak safe haven consistently
throughout the sample period. Both silver and crude oil work more like risky than safe assets to safeguard investments in the Saudi
sectoral equity indexes.
In the case of the UAE, gold behaved like a weak safe haven against the consumer staple index during both pandemics. For the
remaining three sectors, gold exhibited weak safe haven properties in case of COVID-19 during the first 50 days and in the GFC during
the last 50 days. Silver and crude oil couldn’t offset the decline in UAE sectoral equity indexes returns during both the GFC and COVID-
19. The results of GCC sectoral equity indexes with VIX confirm that all returns of all the sectoral indexes with the exception of the
Bahrain industrial index and Bahrain basic materials index are vulnerable to the rising global financial volatility during a financial
crisis. This decline is a natural response of equity markets to externalities such as the GFC and COVID-19 (Alber, 2020; Baker et al.,
2020; Zhang et al., 2020). Comparing the vulnerability of GCC sectoral indexes to the rising global financial volatility during the two
crises periods i.e., GFC and COVID-19, it is evident that GCC sectoral indexes were comparatively more resilient during the GFC. This
could be due to the low resilience of their financial system during the COVID-19 compared to GFC as found by Akkas and Al Samman
(2021).
The abovesaid results exhibit several interesting patterns that should be of interest to researchers, practitioners and policymakers.
First, among the three global commodity indexes, gold is still the safest candidate to offset diminishing returns in GCC sectoral equity
indexes. Echoing other studies (e.g., Akhtaruzzaman et al., 2021a; Akhtaruzzaman et al., 2020; Baur and Lucey, 2010; Beckmann et al.,
2015; Ciner et al., 2013; Hood and Malik, 2013; Ji et al., 2020; Omane-Adjepong and Alagidede, 2021) we declare gold at least a weak
safe haven for the majority of GCC sectoral equity indexes during most of the GFC and the COVID-19 time period. Second, as found by
Dutta et al. (2020), we also evidence that the safe haven properties of gold were comparatively more evident during the initial stage of
the COVID-19 pandemic. However, disregarding the initial 50 days after a financial crisis reaches its peak, gold was a better hedge
during the GFC compared to COVID-19 as found by Hassan et al. (2021).
Third, in line with previous studies (e.g., Boubaker et al., 2020; Cheema et al., 2020; Hood and Malik, 2013) we also evidence that
silver does not seem to possess the safe haven property when held in a portfolio with a majority of GCC sectoral equity indexes during
most of the GFC and the COVID-19 time period. Particularly, we find that the refuge characteristics of silver during the COVID-19 are
comparatively weaker than gold which upholds the evidence provided by Salisu et al. (2021). Fourth, crude oil failed to provide
sanctuaries during most of the GFC and the COVID-19 period as found by others (Ciner et al., 2013; Disli et al., 2021). Besides, the
majority of our plots that correlate GCC sectoral equity indexes with global commodity indexes exhibit a sharp upward spike during
days 40–50 into the COVID-19 pandemic as observed by others (Hassan et al., 2021; Kinateder et al., 2021). This unusual spike could
be associated with two major developments in that period. Firstly, on March 11, 2020, World Health Organization (2020) declared
21
COVID-19 as a global pandemic. Secondly, March 9, 2020, marks the onset of the oil price war that plunged the crude oil prices by
more than 20% in a single day (Panda, 2020).
As policy implications, our results reinforce the dexterity of gold as the most effective safe haven to safeguard investments in GCC
sectoral equity indexes during a financial turmoil. Acting as a stabilizing force for the financial system in the face of a crisis, the
acquisition of gold can better off investors in shielding their investments. For policymakers and financial analysts who are persistently
confronted with the need to supply reliable and precise forecasts for policy decisions and safe investment options, our study lends
support that considering the resilience of investment candidates to global financial uncertainty can produce better forecast outcomes.
Keeping in sight the extreme susceptibility of GCC equity indexes to crumble at times of high uncertainty, portfolio managers are
suggested to carefully follow the behavior of each asset in one’s portfolio during a financial turmoil for the effective implementation of
their hedging strategies and risk management (Nguyen and Faff, 2006; Šeho et al., 2021).
The scope of this study is limited to the GCC sectoral indexes only. Being the largest oil exporters in the world, GCC countries have
peculiar geopolitical characteristics that have a dominant effect on their economic development and financial markets (Ibrahim,
2019). Hence, caution is advised in generalizing the findings to the indexes in other geographical locations. Given the similar behavior
of GCC countries to global financial volatility and potential safe haven, our study also indicates the possibility of financial contagion
among the GCC countries. As discussed by others (see e.g., Dean et al., 2010; Wang et al., 2018), an extreme financial volatility in an
asset market might spillover to other markets in that country or can trigger volatility in foreign markets as well. But this could be a
research question for future researchers to answer. Lastly, safe havens in this study are confined to global commodity indexes only.
Following Hassan et al. (2021), future studies could extend the frontier of knowledge by testing the refuge characteristics of other safe
haven candidates such as exchange rates and sovereign bonds for GCC sectoral equity indexes. Replicating this study using the optimal
portfolio design and hedging ratios as discussed by Akhtaruzzaman et al. (2021a) can be another way to further extend this study.
Declarations of interest
None.
CRediT authorship contribution statement
M. Kabir Hassan: Conceptualization, Data curation, Formal analysis, Investigation, Methodology, Project administration, Re
sources, Software, Supervision, Validation, Visualization, Writing – original draft, Writing – review & editing. Muhammad Kamran:
Conceptualization, Data curation, Formal analysis, Investigation, Methodology, Project administration, Resources, Software, Super
vision, Validation, Visualization, Writing – original draft, Writing – review & editing. Hadrian Geri Djajadikerta: Conceptualization,
Data curation, Formal analysis, Investigation, Methodology, Project administration, Resources, Software, Supervision, Validation,
Visualization, Writing – original draft, Writing – review & editing. Tonmoy Choudhury: Conceptualization, Data curation, Formal
analysis, Investigation, Methodology, Project administration, Resources, Software, Supervision, Validation, Visualization, Writing –
original draft, Writing – review & editing.
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Pacific-Basin Finance Journal 73 (2022) 101768

Contents lists available at ScienceDirect

Pacific-Basin Finance Journal

Search for safe havens and resilience to global financial volatility:

Mean − 0.001 0.001 − 0.001 − 0.001 − 0.001 − 0.001 − 0.001 − 0.001

Qatar Qatar Qatar Qatar

2. Data and methodology

2.1. Data and preliminary analysis

2.2. DCC-GARCH model

M.K. Hassan et al.

Pacific-Basin Finance Journal 73 (2022) 101768

Bahrain − 0.003*** 0.003 0.003 0.006*** 0.000 0.000 0.000 0.000

DCC Equation last part

Pacific-Basin Finance Journal 73 (2022) 101768

Qt = (1 − a − b)C + aut− 1 u′t− 1 + bQt− 1 (6)

3.1. Bahrain sectoral equity indexes

Pacific-Basin Finance Journal 73 (2022) 101768

Pacific-Basin Finance Journal 73 (2022) 101768

Oman 0.000 0.013 0.055 0.009 0.000 0.000 0.000 0.000

Pacific-Basin Finance Journal 73 (2022) 101768

3.2. Kuwait sectoral equity indexes

3.3. Oman sectoral equity indexes

3.4. Qatar sectoral equity indexes

Qatar − 0.008*** 0.009 0.010 0.010* 0.000 0.000 0.000 0.000

Pacific-Basin Finance Journal 73 (2022) 101768

Pacific-Basin Finance Journal 73 (2022) 101768

UAE. 0.010*** 0.013*** 0.020** 0.020*** 0.000 0.000 0.000 0.000

Pacific-Basin Finance Journal 73 (2022) 101768

3.5. Saudi Arab sectoral equity indexes

3.6. UAE sectoral equity indexes

3.7. Robustness tests

4. Conclusion and policy implications

CRediT authorship contribution statement

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Bahrain − 0.003* 0.003 0.003 0.006* 0.000 0.000 0.000 0.000

UAE. 0.010* 0.013* 0.020 0.020* 0.000 0.000 0.000 0.000