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<p>We conduct a portfolio analysis using three strategies: (i) minimum-variance, (ii) minimum-connectedness, and (iii) minimum-frequency-connectedness, aiming to offer practical diversification recommendations for investors in Gulf Cooperation Council (GCC) countries. Utilizing daily data spanning from 2006 to 2022, we present several stylized facts regarding the integration or segmentation of crude oil and GCC sectoral stock markets. Our findings reveal that Saudi sector stock markets exhibit the largest spillovers from the oil market, with heightened global connectedness observed during global financial crises. However, we find no evidence of significant connectedness during the ongoing Russian-Ukrainian conflict. The dynamic frequency decomposition of connectedness highlights the financial and industrial sectors in Qatar, Saudi Arabia, and Oman as the main net transmitters of spillovers in the short-term frequency band, while finance, consumer discretionary, and real estate sectors in Saudi Arabia, Dubai, and Qatar dominate in medium and long frequency bands. Notably, oil acts as a net receiver of volatility at high frequencies but becomes a net transmitter at medium and low frequencies. Portfolio analysis demonstrates a trade-off between systemic risk and financial performance in GCC countries. Particularly intriguing is the minimum-frequency portfolio method, which underscores the impact of investment horizon on portfolio performance, with substantial variations observed across different frequency bands.</p>

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Portfolio Selection Based on Time–Frequency Connectedness: Evidence from GCC Sectoral Stock Markets and the Oil Market

  • 期刊论文

  • 发表日期：

    2025年4月23日

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  • Amine Ben Amar,
  • Néjib Hachicha,
  • Mariem Brahim,
  • Abdelkader Sbihi

摘要

We conduct a portfolio analysis using three strategies: (i) minimum-variance, (ii) minimum-connectedness, and (iii) minimum-frequency-connectedness, aiming to offer practical diversification recommendations for investors in Gulf Cooperation Council (GCC) countries. Utilizing daily data spanning from 2006 to 2022, we present several stylized facts regarding the integration or segmentation of crude oil and GCC sectoral stock markets. Our findings reveal that Saudi sector stock markets exhibit the largest spillovers from the oil market, with heightened global connectedness observed during global financial crises. However, we find no evidence of significant connectedness during the ongoing Russian-Ukrainian conflict. The dynamic frequency decomposition of connectedness highlights the financial and industrial sectors in Qatar, Saudi Arabia, and Oman as the main net transmitters of spillovers in the short-term frequency band, while finance, consumer discretionary, and real estate sectors in Saudi Arabia, Dubai, and Qatar dominate in medium and long frequency bands. Notably, oil acts as a net receiver of volatility at high frequencies but becomes a net transmitter at medium and low frequencies. Portfolio analysis demonstrates a trade-off between systemic risk and financial performance in GCC countries. Particularly intriguing is the minimum-frequency portfolio method, which underscores the impact of investment horizon on portfolio performance, with substantial variations observed across different frequency bands.