Directional spillovers from the U.S. and the Saudi market to equities in the Gulf Cooperation Council countries

•The paper provides new insights into directional returns and volatility spillovers from the U.S. and the Saudi market to the rest of equity markets in Gulf Cooperation Council Countries.•The focus is on the nature of transmission pre and post the 2008 financial crisis.•Results show that the Saudi market plays the dominant role.•The U.S. spillovers are tiny and negligible in normal conditions. However, in stress the U.S. market's role becomes more important in the information transmission mechanism.

The paper investigates returns and returns volatility spillovers from the U.S. and the Saudi market to equity markets in the Gulf Cooperation Council countries. A clear jump in net transmissions from both markets was spotted during the financial crisis in 2008. This new pattern of information transmission reflects an increase in association with the U.S. and the Saudi market. Therefore, we may conclude that the strong inter and intra diversification potential that once existed in the Gulf Cooperation Council Countries has been severely impaired in recent years.