Crisis‐Driven Connectedness and Asymmetric Spillovers Between GCC Equity Markets Herding and Energy Commodity Tail Risk

ABSTRACT This study employs a Time‐Varying Parameter Vector Autoregression (TVP‐VAR) framework using more than two decades of daily data from Gulf Cooperation Council (GCC) equity markets to examine the dynamic connectedness between investor herding in GCC equity markets and tail risk in energy commodities. The findings reveal heterogeneous and time‐varying herding behaviour across GCC markets, with stronger evidence of herding during bullish market conditions and crisis periods. Energy tail risk is significantly connected to GCC investor herding and acts as a dominant net transmitter of shocks on average, although its role and transmission strength vary across crisis episodes. The dynamic connectedness between GCC investor herding and energy tail risk intensifies particularly during the global financial crisis (GFC) and the Russia–Ukraine war, highlighting the importance of financial crises and geopolitical events in shaping cross‐market shock transmission. Qatar and Saudi Arabia dominate herding transmissions over the full sample, while the dominant transmitters and receivers vary considerably across crisis periods. Overall, the results reveal dynamic, asymmetric, and bidirectional spillovers between GCC investor herding and energy‐market tail risk, with important implications for equity traders, institutional investors, portfolio and risk managers, and policymakers in the GCC region.