The Interconnectedness Between Cryptocurrencies and Stock Markets in GCC Countries: An Empirical Analysis

The GCC region has emerged as a hub for cryptocurrency innovation attracting investors globally, showcasing the region's commitment to fostering a vibrant digital economy. The marked increase in the investment in cryptocurrencies in the region in recent times is driven by many factors including a tech-savvy population, a supportive regulatory environment, the adoption of blockchain technology, and the like. The shift in investor's preference towards these cryptocurrencies as against traditional asset classes calls for a clear understanding between these two asset classes. Towards that end, this research examines the inter-dependencies between the cryptocurrencies and stock markets in Gulf Cooperation Council (GCC) countries. The study analyzes a comprehensive dataset including ten cryptocurrencies and 6 stock market indices covering daily closing prices from 2020 to 2024. Granger causality tests and Lagrange multiplier autocorrelation parameters evaluate the dependencies and predictive linkages between stock indices and cryptocurrency prices. Preliminary findings reveal varying degrees of correlation, with Bitcoin and Ethereum exhibiting stronger links to GCC indices, likely reflecting their interdependency in the market.