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Volume 8
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Article

Tail Dependence and Risk Spillover from the US to GCC Banking Sectors

by
Faisal Alqahtani
1,
Nader Trabelsi
2,3,
Nahla Samargandi
4,5 and
Syed Jawad Hussain Shahzad
6,7,*
1
College of Business Administration, Taibah University, Saudi Authority for Data and Artificial Intelligence, Riyadh 344, Saudi Arabia
2
Department of Finance and Investment, Imam Muhammad bin Saud Islamic University (IMSIU), Riyadh 11432, Saudi Arabia
3
LARTIGE, University of Kairouan, Kairouan 3100, Tunisia
4
Department of Economics, Faculty of Economics and Administration, King Abdulaziz University, Jeddah 80200, Saudi Arabia
5
Centre of Research Excellent in Renewable Energy and Power Systems, King Abdulaziz University, Jeddah 80200, Saudi Arabia
6
Finance, Control and Law Department, Montpellier Business School, 34080 Montpellier, France
7
Department of Accounting, Analysis and Audit, South Ural State University, 454080 Chelyabinsk, Russia
*
Author to whom correspondence should be addressed.
Mathematics 2020, 8(11), 2055; https://doi.org/10.3390/math8112055
Submission received: 16 September 2020 / Revised: 11 November 2020 / Accepted: 13 November 2020 / Published: 18 November 2020
(This article belongs to the Special Issue Application of Mathematical Analysis and Models to Financial Economics)
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Abstract

This study investigates the structure of the tail dependence between the United States (US) and Gulf Cooperation Council (GCC) banking sectors for the period February 2010 to July 2017. Conditional value at risk and conditional diversification benefits are calculated. The GCC banking sectors show lower tail dependence with the US banking sector. This is confirmed by the fact that GCC banking sectors receive higher downside risk spillover from the US banking system during downside market movements compared to upside risk spillover effects. Interestingly, an equally weighted portfolio of US and GCC banking stocks can provide relatively higher diversification benefits. These findings have implications for portfolio diversification, asset allocation and hedging strategies.
Keywords: banking sector; tail dependence; risk spillover; conditional diversification; GCC banking sector; tail dependence; risk spillover; conditional diversification; GCC

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MDPI and ACS Style

Alqahtani, F.; Trabelsi, N.; Samargandi, N.; Shahzad, S.J.H. Tail Dependence and Risk Spillover from the US to GCC Banking Sectors. Mathematics 2020, 8, 2055. https://doi.org/10.3390/math8112055

AMA Style

Alqahtani F, Trabelsi N, Samargandi N, Shahzad SJH. Tail Dependence and Risk Spillover from the US to GCC Banking Sectors. Mathematics. 2020; 8(11):2055. https://doi.org/10.3390/math8112055

Chicago/Turabian Style

Alqahtani, Faisal, Nader Trabelsi, Nahla Samargandi, and Syed Jawad Hussain Shahzad. 2020. "Tail Dependence and Risk Spillover from the US to GCC Banking Sectors" Mathematics 8, no. 11: 2055. https://doi.org/10.3390/math8112055

APA Style

Alqahtani, F., Trabelsi, N., Samargandi, N., & Shahzad, S. J. H. (2020). Tail Dependence and Risk Spillover from the US to GCC Banking Sectors. Mathematics, 8(11), 2055. https://doi.org/10.3390/math8112055

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