OPEC meetings, oil market volatility and herding behaviour in the Saudi Arabia stock market

Dina Gabbori, Basel Awartani, Aktham Maghyereh, Nader Virk

    Research output: Contribution to journalArticlepeer-review

    13 Citations (Scopus)

    Abstract

    We investigate the influence of oil market volatility and hand-picked OPEC meetings data on herding tendency in the Saudi equity market. Our results show the presence of significant herding behaviour in the Saudi market; surprisingly this herding behaviour is independent of oil market volatility. Importantly, we find herding on and around the OPEC meeting days however this is only limited to a period of high global uncertainty that is, during the Global Financial Crisis period (GFC) of 2008–2010. However, when we filter out factor-based herding in the Saudi equities, we also find persistent herding in the post GFC period. These results are consistent when we assess the impact of OPEC meetings using event windows of one to 5 days before and after the announcement. In consideration of the crucial role of OPEC in determining the oil prices, we explain our results of Saudi market herding on and around OPEC meeting days for the prior announcement ambiguity and corrections before, on and after the announcements on global supply. Our results show that this tendency has originated during the GFC, has persisted in the post-GFC in the Saudi equities and surprisingly, is largely found absent in the periods when the Saudi equity market witnessed bullish market conditions. Our results are robust after accounting for common factor return variations in equity returns, the unconditional and conditional estimates of the volatility in oil prices and several event windows around OPEC meeting days.

    Original languageEnglish
    Pages (from-to)870-888
    Number of pages19
    JournalInternational Journal of Finance and Economics
    Volume26
    Issue number1
    DOIs
    Publication statusPublished - Jan 2021

    Keywords

    • equity market
    • global financial crisis
    • herding
    • oil market volatility
    • OPEC meetings

    ASJC Scopus subject areas

    • Accounting
    • Finance
    • Economics and Econometrics

    Fingerprint

    Dive into the research topics of 'OPEC meetings, oil market volatility and herding behaviour in the Saudi Arabia stock market'. Together they form a unique fingerprint.

    Cite this