Global Finance Journal 22 (2011) 42–55

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Global Finance Journal

j o u r n a l h o m e p a g e : w w w. e l s ev i e r. c o m / l o c a t e / g f j

Oil price movements and stock market returns: Evidence from

Gulf Cooperation Council (GCC) countries
Sunil K. Mohanty a,⁎, Mohan Nandha b,
Abdullah Q. Turkistani c, Muhammed Y. Alaitani c
a
Department of Finance, Opus College of Business, University of St. Thomas, Minneapolis, MN 55403, USA
b
Department of Accounting and Finance, Monash University, Melbourne, Australia
c
Islamic Economic Research Center, King Abdulaziz University, Jeddah, Saudi Arabia

a r t i c l e i n f o a b s t r a c t

Article history: A number of recent studies have found a link between oil price
Received 22 March 2010 changes and stock prices. However, these studies mostly concentrate
Accepted 24 March 2011 on developed economies and analyze the impact of oil price shocks on
Available online 20 May 2011
stock returns at the aggregate stock market level. We assess the
relation between changes in crude oil prices and equity returns in Gulf
JEL classification: Cooperation Council (GCC) countries using country-level as well as
G10
industry-level stock return data. Our findings show that at the country
C32
level, except for Kuwait, stock markets have significant positive
Keywords: exposures to oil price shocks. At the industry level, the responses of
Oil shocks industry-specific returns to oil shocks are significantly positive for
Stock returns only 12 out of 20 industries. Our study also provides evidence that oil
GCC countries price changes have asymmetric effects on stock market returns at the
country level as well as at the industry level.
© 2011 Elsevier Inc. All rights reserved.

1. Introduction

Oil is a major resource that has been (and continues to be) extensively used around the world. It is often
argued in the literature that the fluctuation in oil price is an exogenous shock to the economy (e.g.
Hamilton (1983); Hamilton (2003); and Kilian (2008a, b)) and its impact on aggregate output is significant
(Mork (1994)). Given the critical role of oil in the modern economy, a large body of economics literature
has focused on the impact of oil price shocks on macro-economic variables such as inflation, growth rates,

⁎ Corresponding author. Tel.: + 1 651 962 4416; fax: + 1 651 962 4610.
E-mail address: skmohanty@stthomas.edu (S.K. Mohanty)

1044-0283/$ – see front matter © 2011 Elsevier Inc. All rights reserved.
doi:10.1016/j.gfj.2011.05.004
 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55 43

business cycles, and exchange rates in the U.S. 1 Prior studies have also documented the critical importance
of oil to other economies around the world. 2
In recent years, oil price hikes have received considerable attention in the popular press. Casual
evidence suggests that stock markets are sensitive to oil price shocks. For instance, the Financial Times on
August 21, 2006 reported that U.S. stock prices declined due to an increase in crude oil prices caused by
geopolitical risk in the Middle East (including the Iranian nuclear program and terrorist attacks by Islamic
militants). The same newspaper on October 12, 2006 attributed the strong rally in global equity markets to
a slide in crude oil prices. Similarly, the Wall Street Journal on May 2, 2007 reported the following, “A big
drop in crude-oil prices also helped stocks, which generally benefit from signs that consumers'pocket books
won't be sapped by higher pump prices.” While there is a strong presumption in the financial press that oil
prices drive the stock market, the empirical evidence on the impact of oil price shocks on stock prices has
been mixed (e.g. Chen, Roll, and Ross (1986); Hamao (1989); Kaneko and Lee (1995); Huang, Masulis, and
Stoll (1996); Jones and Kaul (1996); Wei (2003); and Driesprong, Jacobsen, and Maat (2008)). 3
Until the oil bust of late 2008 followed by the subprime lending crisis, financial press in the U.S. and
Western Europe routinely attributed stock price changes on a given day to oil price movements. 4 While a
large number of studies in finance literature have focused on the effects of oil shocks on stock returns in
developed economies, few studies have investigated the relation between oil price changes and stock
prices in emerging economies. 5 Only a small number of studies analyze the impact of oil price shocks on
stock returns at the industry level for developed countries. 6 However, finance literature relating to oil price
changes and stock returns in GCC countries 7 is scant. 8 While a large body of literature emphasizes the
potential importance of asymmetric responses of GDP growth to energy price shocks (see, e.g. Mork
(1989); Lee, Ni, and Ratti (1995); Lee and Ni (2002); Hamilton (1996 and 2003); and Kilian (2008a)), none
of the prior studies examines asymmetric effects of oil price shocks on stock returns in GCC countries. The
primary goal of this study is to investigate whether responses of equity returns to oil price shocks are
significant at the country level as well as at the industry level for GCC countries. The secondary goal of the
study is to examine whether there are asymmetric responses of equity returns to oil price increases and oil
price decreases.
Analyzing oil price exposure of stock markets for GCC countries at the country and industry levels is
important for several reasons. First, the GCC capital markets differ from those of developed economies and
from other emerging capital markets because GCC stock markets are largely segmented from developed
stock markets (e.g. Yu and Hasan (2008)), as well as from the regional capital markets, due to varying
levels of market efficiency attributed to relative degrees of market liberalization and reform within GCC
countries (e.g. Bley and Chen (2006)), for details about the development of GCC capital markets). As a

1
Hamilton and Herrera (2004) provide a comprehensive survey on studies related to oil shocks.
2
See for example, Jimenez-Rodriguez and Sanchez (2005), Killian (2008a, b), and Cologni and Manera (2008) on OECD countries,
and Cunado and Perez de Garcia (2005) on Asian countries.
3
Kilian and Park (2009) show that the responses of aggregate stock market returns to oil price shocks differ significantly
depending on whether the increase in oil price is driven by global demand or supply shocks in the crude oil market.
4
For example, when the search terms of “oil prices,” “oil prices and stocks,” or “oil price and stocks” are used, oil prices figure in
the headlines of the Wall Street Journal on 271 days over the 2005–2007 period and most of the accompanying articles attribute
stock price movements to oil price changes.
5
See, for example, Jones and Kaul (1996) for the U.S., Canada, Japan, and the U.K.; Faff and Brailsford (1999) for Australia; Basher
and Sadorsky (2006) for emerging economiesfor 15 countries in the Asia-Pacific regions; Park and Ratti (2008) for the U.S. and 13
European countries; and Dreisprong, Jacobsen, and Maat (2008) for 18 developed countries and 30 emerging economies.
6
See, for example, Faff and Brailsford (1999), who examine the effects of oil shocks on stock returns for Australian industries.
Nandha and Faff (2008) analyze the effects oil price changes have on 35 global sector indices. Sadorsky (2001), Hammoudeh and Li
(2005), El Sharif, Brown, Burton, Nixon, and Russell (2005), Hammoudeh and Choi (2006), and Nandha and Brooks (2009) analyze
the oil price exposure of oil-sensitive industries such as the oil and gas industry and the transportation industry using industry-level
data. Most recently, Mohanty and Nandha (2011) analyze the relation between oil price changes and stock returns using both firm-
level as well as the industry-level data for the U.S. oil and gas sector.
7
On May 25, 1981, the countries of the Arab Gulf region (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab
Emirates) ratified the charter that established the Cooperation Council for the Arab States of the Gulf (GCC countries hereafter). In
2008, total GDP of the GCC was over $1 trillion, and the average per capita income was about $25,000.
8
For example, Hammoudeh and Aleisa (2004) investigate the relation between oil price changes and stock prices at the country
level for five GCC countries (Bahrain, Kuwait, Oman, Saudi Arabia, and the United Arab Emirates), and they find evidence of a
positive significant relation between oil price changes and stock prices for only Saudi Arabia. In contrast, Hammoudeh and Choi
(2006) find no significant relation between oil price changes and stock market returns in GCC countries.
44 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55

result, global investors in GCC stocks are likely to gain from international diversification of risk. Second,
since GCC countries are the major suppliers of oil (oil exporting countries) in world energy markets, their
stock markets are likely to be influenced by fluctuations in oil prices. Third, GCC stock markets are sensitive
to regional political developments. 9 Fourth, the analysis at the industry level is crucial because a country-
level analysis may not reveal the oil price exposure to all individual industries in GCC countries. Following
the spirit of Fama and French (1993), we argue that all industries are not homogeneous. Different industry
factors, including cost structure, competition, and regulation, can have different impacts on industry
returns due to rising or falling oil prices. Fifth, prior studies in the literature have focused on “oil-intensive”
industries (i.e. the oil and gas sector and the airline and transportation industries), and they largely ignore
other “non-oil-intensive” industries (e.g. industrial and service sectors) that can also be susceptible to oil
price risk. Finally, understanding the relation between oil price changes and stock market returns in GCC
countries is important for global investors and portfolio managers because the results of our study could
reveal promising areas for regional and world portfolio diversification.
We examine oil price exposures of stock markets at country and industry levels focusing on GCC
countries. Specifically, the study addresses the following questions:

(1) Do oil price movements affect stock market returns of GCC countries?
(2) Are oil price exposures significant at the individual industry level for each country within the GCC?
(3) Do oil price exposures vary across GCC countries and across industries?
(4) Are oil price exposures at the country and industry levels symmetrical in response an increase or
decrease in oil price?

The rest of the paper is organized as follows. In the next section, we review and align our work with the
relevant literature. In Section 3, we develop a theoretical linkage between oil price shocks and equity
returns, and we discuss the relation between oil prices and GCC stock markets. In Section 4, we describe our
research methodology and data. We present our empirical findings in Section 5. Section 6 concludes the
paper.

2. Literature review

Chen et al. (1986) examine how a set of macro-economic state variables systematically influence stock
market returns. However, in the case of oil prices, they find no overall impact on asset pricing. Jones and
Kaul (1996) examine whether the stock market rationally evaluates the impact of oil shocks on stock
returns. They use quarterly data for the U.S. (1947–1991), Canada (1960–1991), Japan (1970–1991), and
the U.K. (1962–1991). Their results provide evidence on the impact of oil shocks on stock prices. Huang et
al. (1996) investigate the dynamic interactions between oil futures prices and stock prices in the United
States during the 1980s. They find that futures returns are not correlated with stock market returns, except
for oil company returns. Sadorsky (1999) estimates a vector auto-regression model to study the relation
between oil price changes and stock returns in the U.S. He finds that both oil price changes and oil price
volatility play significant roles in affecting stock returns. Hammoudeh and Aleisa (2004) investigate the
relation between oil prices and stock prices for five GCC countries (Bahrain, Kuwait, Oman, Saudi Arabia,
and the United Arab Emirates), and they find that there is a positive significant relation between oil price
changes and stock prices only for Saudi Arabia. Basher and Sadorsky (2006) analyze the impact of oil price
changes on 21 emerging stock market returns (Argentina, Brazil, Chile, Colombia, India, Indonesia, Israel,
Jordan, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, South Africa, Sri Lanka, Taiwan,
Thailand, Turkey, and Venezuela) over the period 1992–2005 using daily, weekly, and monthly data. They
provide evidence that oil price shocks have significant impacts on stock price returns in emerging markets.
Park and Ratti (2008) examine the effects of oil price shocks and oil price volatility on stock returns in the
U.S. and 13 European countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, the
Netherlands, Norway, Spain, Sweden, and the U.K.) using a vector autoregressive model using monthly
data for the period 1986–2005. They conclude that oil price shocks have a significant impact on stock

9
Similar to the blueprints of the European Union (EU), regional leaders launched the GCC union in January 2003, indicating an
important first step in the process of economic integration. Following the EU, GCC countries set goals to achieve a common market
in 2007 and a single currency in 2010.
 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55 45

returns. Their results also show that the effects of oil price shocks on stock prices vary among countries.
Using country-level data for 48 different countries (both developed and emerging economies), Driesprong
et al. (2008) find that changes in oil prices predict stock market returns worldwide. On the other hand,
using industry-level data, they find significant difference between predictability results for different stock
market sectors. They also find that an increase in oil price tends to have a positive effect on energy
exporting countries and have a negative effect on energy importing countries. However, Driesprong et al.
(2008) do not include GCC countries in their sample.
Prior literature investigating the link between oil price shocks and stock returns at the industry level
suggests that exposures to changes in oil price vary considerably over time and across industry sectors. Huang
et al. (1996) use a VAR model to examine the relation between oil futures returns and U.S. stock returns. They
find that oil futures price movements have significant positive impacts on individual industry returns, but they
have no significant impacts on market indices such as the S&P 500 index. Faff and Brailsford (1999) investigate
the sensitivity of Australian equity returns to an oil price factor using monthly data for the period 1983–1996.
They find a positive and significant impact of oil price shocks on the oil and gas industry and the diversified
resources industry. Sadorsky (2001) examines Canadian oil and gas industry stock market reactions to
changes in oil prices using monthly data for the period 1983–1999. He finds that stock price returns are
sensitive to risk factors such as market index and oil price. Aleisa, Dibooglu, and Hammoudeh (2003) examine
the relations among oil prices and U.S. oil industry equity indices. The findings of their study suggest that the
firms included in the S&P Oil Domestic Integrated Index and the S&P Oil International Integrated Index have a
stronger link to crude oil prices than firms included in the S&P Oil and Gas Exploration Index or the S&P Oil and
Gas Refining and Marketing Index. Using industry-level data, Hammoudeh and Li (2005) examine and compare
the oil-sensitivity of two major U.S. industry stock indices: one for the oil industry and the other for the
transportation industry. They find significant positive oil price sensitivity in the oil industry and negative
significant oil price sensitivity in the transportation industry, with the oil industry showing the greatest
sensitivity. El Sharif et al. (2005) show that the changes in oil prices have a significant positive impact on stock
returns in the oil and gas industry in the United Kingdom. Hammoudeh and Choi (2006) examine the oil
sensitivity of equity returns in GCC countries and find evidence that changes in oil prices have no significant
impact on equity indices of GCC countries. Nandha and Faff (2008) analyze 35 global sector indices and report
oil and gas as the only sector where the impact of oil price shocks is significantly positive. Driesprong et al.
(2008) examine effects of oil price changes on stock market returns using monthly market data from 18
developed and 30 developing countries. They find that changes in oil prices predict stock market returns
worldwide. They also document that the relation between stock market returns and oil price changes tends to
be stronger for the non-oil-related sectors, such as consumer goods, services, information technology, and
financials than the oil-related utilities and resource sectors. However, prior studies don't examine the relation
between oil price changes and equity market returns using the industry-level analysis for GCC countries.

3. Oil shocks, equity returns, and capital markets in the GCC

3.1. Oil shocks and equity returns

This section describes the theoretical linkage between oil price and equity returns. Using a simple
illustration, Huang et al. (1996) suggest that macro-economic variables such as commodity price can have
a significant impact on the stock return of a firm. Assuming firm igenerates an infinite stream of constant
expected cash flow, then the stock price of that firm, i(pi), is simply the present value of expected future
cash flow, (E(CF)), discounted by the discount rate, r, or more formally:

pi = EðCF Þ=EðrÞ; ð1Þ

where E(·) is the expectation operator, and it follows that stock return (Ri) can be expressed
approximately as:

Ri = dp=p = dðEðCF ÞÞ=EðCF Þ−dðEðr Þ=r;Þ ð2Þ

where d(·) is the differentiation operator.

46 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55

Thus, stock returns are affected by systematic movements in expected cash flow as well as by discount
rates. Therefore, an increase in oil price can have a positive or negative effect on a firm's cash flow
depending on whether the firm uses oil as an input (consumer) or output (producer). Similarly, changes in
oil price can also affect discount rates, which can lead to an increase in the hurdle rate on corporate
investment. A higher hurdle rate can have a negative impact on a firm's stock price. Thus, the true relation
between changes in oil prices and stock returns of a firm depends on the net effects that are due to the
changes in expected cash flow and expected discount rates. First, the effect of oil shocks on stock markets
for a specific country (industry) can be positive or negative depending on whether the country (industry)
is a net producer or net consumer of oil resources (e.g. Huang et al. (1996); Nandha and Faff (2008); and
Nandha and Brooks (2009)). For example, given rising oil and gas prices in the past decade, the resource
stocks of a country (industry) that are related to the oil and gas business or their products and services
should be valued upward because their expected future cash flow should rise and equity returns at the
country level (industry) should go up. In contrast, if resource prices collapse, expected future cash flow will
decline and equity returns will go down. Second, a rise in oil price can induce resource reallocation (Pindyk
(1991); Hamilton (1996)) from more adversely affected sectors to less adversely affected sectors, which in
turn can affect an industry's cash flow and profits. Third, Kilian (2009) suggests that oil price shocks can
have different effects on the real economy depending on whether oil shocks are attributed to global supply
shocks or to global demand shocks (see e.g. Kilian 2008b; Kilian 2009; and Kilian & Park 2009). Kilian and
Park (2009) find evidence that the impact of oil price shocks on equity returns varies significantly from one
industry to another, depending on the underlying causes of the oil price shocks.

3.2. Oil prices and GCC stock markets

The Gulf Cooperation Council (GCC) consists of six Arab Countries, including four major oil-exporting
countries that are important decision makers in the Organization of Petroleum Exporting Countries
(OPEC). The six members are Saudi Arabia, Kuwait, United Arab Emirates (UAE), Qatar, Oman, and Bahrain.
The non-OPEC members among them are Oman and Bahrain. The GCC countries possess 47% of the world's
1018.8 billion barrels of oil reserves. For GCC countries, oil exports largely determine foreign earnings and
the governments' budget revenues and expenditures; thus, they are the primary determinant of aggregate
demand. The aggregate demand effect influences corporate output and domestic price levels, which
eventually impacts corporate earnings. Such a strong oil influence on the national economy of these
countries presumably makes share prices in their stock markets very vulnerable to oil prices and changes in
the oil market. Thus, one would expect that an increase in oil price would positively affect economic output
and corporate earnings at the aggregate level for GCC countries, but the impact of oil price movements on
stock prices at the country and industry levels is ambiguous. It is an empirical question, determining which
of the positive (increased revenues, cash flows, and earnings) and negative (inflation, interest rate, and
discount rate) effects offset the other.
Over the past decade, the Gulf States have been experiencing unprecedented growth in their economies
and stock markets. While the majority of the companies that are listed on the Gulf Cooperation Council

Table 1
Comparison among GCC stock markets.
Source: Arab Monetary Fund (AMF). 2009. 3Q, No.59.

Country Companies listed Market capitalization (US$ bil.) Number of trading days Turnover ratio P/E

Bahrain 49 16.978 241 0.6 7.4

Kuwait 204 117.557 242 16.3 N/A
Qatar 43 92.281 247 6.0 N/A
Oman 122 24.053 229 6.9 10.6
Saudi 135 328.101 238 19.5 17.1
UAE Abu Dhabi 66 90.538 245 5.1 9.9
Dubai 66 66.468 248 16.0 16.3
GCC 685 735.976 1,690
 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55 47

(GCC) stock exchanges have solid track records, there is limited historical data to analyze the basis of this
remarkable growth. However, Table 1 compares characteristics of GCC stock markets at the end of the third
quarter of 2009.
As can be seen from Table 1, the market capitalization of GCC countries varies widely from as low as 17
US $ billion (Bahrain) to 330 US $ billion (Saudi Arabia). Similarly, the number of companies listed in stock
exchanges ranges from as low as 43 (Qatar) to 135 (Saudi Arabia). However, the number of trading days
per year varies within a narrow range from 229 (Oman) to 248 (Dubai). The data on market capitalization
and turnover ratio presented in Table 1 suggest that the Saudi stock market is the largest and most liquid
market while the Bahrain stock market is the smallest and least liquid among the six GCC stock markets.
Saudi Arabia is the most active stock market and it makes up 45% of the GCC stock markets based on total
market capitalization. Overall, the GCC stock markets are limited by several structural and regulatory
weaknesses such as relatively small numbers of listed firms, large institutional holdings, and low sector
diversification. In recent years, however, legal, regulatory, and supervisory changes have led to increased
market transparency and disclosure. The liquidity of the GCC markets has also improved, and the markets
are now open to non-GCC members (foreign investors). 10

4. Data and methodology

4.1. Data

We use the Datastream equity indices for GCC countries obtained from the Thomson Datastream
database. Our sample contains weekly (Wednesday) stock return data in U.S. dollars for all GCC countries
and for selected industries within the GCC. The Datastream equity index system allocates firms to
industries/sectors using the joint classification system launched by the FTSE Group, as well as information
from the Dow Jones Indexes. First, we examine the data available from Datastream for all industries
operating in GCC countries. For each of the countries, we narrow down the list of industries to include
as many as possible that have sufficiently long data periods. Our final sample includes weekly return
data with varying numbers of industries from four GCC countries: Bahrain (6), Kuwait (7), Oman (3),
and Qatar (4). For example, the industries for Bahrain are commercial banks, hotel and tourism,
industrial, insurance, investment, and services industries; in the case of Qatar, we use banking and
financial, industrial, insurance, and services industries. Considering the relatively short history of GCC
markets and the data availability to us, the data period begins in June 2005 and ends in December 2009
(latest possible when we started working on this research project). With regard to oil prices, we use
weekly returns from the West Texas Intermediate (WTI), expressed in U.S. $/barrel. We use WTI prices
for two reasons. First, prices of the WTI are the most widely used indices in the world. Second, when
firms use hedging instruments, the vast majority of firms use futures, forwards, and other over-the-
counter derivatives based on the WTI.

4.2. Empirical framework

An increasing number of empirical studies have sought to investigate whether macroeconomic

variables constitute a source of systematic asset price risk. In order to estimate the sensitivity of stock
returns to macroeconomic risk factors, it is appropriate to use a linear factor pricing model. Linear factor
analysis can be regarded as a special case of a consumption-based asset pricing model (e.g. Cochrane
(2005)). Accordingly, the following return-generating process is assumed to be well specified:

∼ K ∼ ∼
Rit = αi0 + ∑ βij X jt + εit ; ð3Þ
j=1

10
For example, in March 2006, Saudi authorities lifted the restriction that limited foreign residents to invest only in mutual funds,
and the other GCC countries have progressively followed suit.
48 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55

∼
where X it = risk factor j in time t;

j = 1; 2; :::: K; t = 1; 2; ::: T

i = 1; 2; :::: N; t = 1; 2; ::: T
∼
E ðεit Þ = 0; i = 1; 2; :::: N; t = 1; 2; :::T;
 
∼ ∼
E μ is ; μ jt = σij ; i; j = 1; 2; :::: N; s = t
= 0; i; j = 1; 2; :::: N; s≠t:

One macroeconomic factor that has received increased empirical attention is oil price. Our study focuses
on the measurement of oil price risk sensitivity of GCC stock markets and the impact of oil price changes on
portfolio returns for a wide array of individual industries in GCC countries. Consistent with the return-
generating process in Eq.(1), we model the relation between oil price shocks and stock market returns at
the country level using a two-factor model as follows:

∼ ∼ ∼
Ri;mt = αi0 + βw + βOil Roilt + εit ð4Þ
∼
where Ri:mt = the weekly return on the stock market index for country iat time t, derived as the log
∼
difference in price level of the market portfolio for country iover week t (ln Pit − ln Pi,t − 1); Rw:t = the weekly
return on the world stock market index at time t, derived as the log difference in price level of world stock
∼
market index over week t; and Roil;t = the weekly return on oil price at time t, derived as the log difference
in oil price index values at the end and beginning of week t.
Prior studies examine the asymmetric effects of oil shocks on stock prices (e.g. Kilian (2008); Nandha
and Faff (2008); and Nandha and Brooks (2009)). Accordingly, our study examines whether rising and
falling oil prices symmetrically influence stock market returns using the following model:

∼ ∼ ∼ ∼
Rmt = αi0 + βw + γui D × Roilt + γdi ð1−DÞ × Roilt + εit ð5Þ

where D is a dummy variable that takes the value of unity if the change in the oil price is positive and D = 0
otherwise; γuiand γdiare indicative of market index returns of the i-th country, corresponding to up and
down movements in the oil price factor, respectively.
Consistent with return-generating model (1), we examine the relation between oil price shocks and
equity returns at the individual industry level using a two-factor model as follows:

∼ ∼O ∼ ∼
Rit = αi0 + βm Rmt + βoil R oil + εit ð6Þ

∼
where Rit = weekly industry returns on the stock index for industry iat time t, derived as the log difference
∼
in prices over the month (ln Pit − ln Pi,t − 1); Rmt = the weekly return on market portfolio m at time∼t, derived
O
as the log difference in the price level of the market portfolio over the week (ln Pit − ln Pi,t − 1); Rmt = the
orthogonalized weekly return on the market at time t, derived as follows:
∼
∼ 
Rmt − E Rmt ; where; EðRmt Þ = αi0 + βoil Roilt ;

∼
and Roilt = the weekly return on oil price at time t, derived as the log difference in oil price index values at
the end and beginning of week t.
The market beta (βm) and the oil beta (βoil) in equation (4) provide measures of market risk sensitivity
and oil price risk sensitivity, respectively.
We also formally test for asymmetry in the oil price sensitivity of the stock for each industry, i, within
each country following this model:

∼ ∼ ∼ ∼ ∼
Rit = αi0 + βm ROmt + γui D × Roilt + γdi ð1−DÞ × Roilt + εit; ð7Þ
 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55 49

where D is a dummy variable taking the value of unity if the change in oil price is positive and D = 0
otherwise; γui and γdi are indicative of the i-th industry's oil price exposure, corresponding to up and down
movements in the oil price factor, respectively.
We test the following two hypotheses for further exploring the impact of oil price changes on stock
returns at the country level as well as at the industry level, as follows:

H01 :γui = γdi

H02 : γui = γdi = 0

Here, it is worth noting that rejection of both of the hypotheses (H01 and H02) simultaneously will
indicate asymmetry in the oil price impact. In the case of oil exporting GCC countries, we anticipate that
both coefficients (γui γdi) are likely to be positive. On the other hand, if H02 is rejected, but H01 is not
'
rejected, then an increase (decrease) in oil price is likely to be positively related to stock returns with no
significant difference between the two coefficients indicating no asymmetry in oil price impact” (see p.18).
The oil price risk exposure coefficients are estimated using the Seemingly Unrelated Regression (SUR)
procedure for all models. There are two main motivations for using the SUR model. The first one is to gain
efficiency in the estimation when the error terms (ε̃it ) are correlated across equations. The second
motivation is to impose or test restrictions that involve parameters in different equations (e.g. Zellner
(1962); Fiebig (2001)). Equation (2) is estimated for each country, as well as for each industry within the
country.

5. Empirical results

Fig. 1 presents the relative growth of oil prices and GCC stock market indices over the June 2005–
December 2009 period. Oil price fluctuates from $30 per barrel to $145 per barrel during our sample
period. As seen in Fig. 1, over the same period, the stock market indices in GCC countries continue to
increase (decrease) as the oil price continues to rise (fall).

5.1. Impact of oil price shocks on equity returns at the country level

Using weekly return data for the June 2005 to December 2009 period, we examine the impact of oil
price changes on stock market returns in GCC countries while controlling for the effect of changes in
returns on world stock market index. We estimate oil price risk exposures of stock market returns of six
GCC countries based on model (4). It is hypothesized that the relation between oil price changes and stock
market returns of oil exporting GCC countries is positive. The oil price risk sensitivities (oil betas) of six GCC

Market Index (LHS):

140
Bahrain
Kuwait 120
Oman
Oil price (RHS) 100
Qatar
2,000 UAE
Saudi Arabia 80
1,600
60
1,200 40

800 20

400

0
2005 2006 2007 2008 2009

Fig. 1. June 2005–December 2009.

50 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55

stock markets are reported in column (4) in Table 2. Results show that oil price risk exposures (oil betas)
for four out of six GCC countries (Oman, Qatar, UAE, and Saudi Arabia) are positive and statistically
significant at the 5% level. However, in the case of Bahrain, it is surprising to note that changes in global
stock market returns have had no significant return on Bahrain's stock market. However, the relation
between oil price changes and stock market returns is weakly positive, but statistically significant only at
the 10% level. On the other hand, it is puzzling that Kuwait's stock market has no significant exposure to oil
price changes. It is possible that the lack of significant oil exposure of Kuwait's stock market is attributed to
insider trading activities that are typically dominated by the Kuwait Investment Authority (KIA) and local
commercial banks (e.g. Bley and Chen (2006)). Overall results suggest that the evidence of oil price risk
exposures of GCC stock markets at the country level is mixed during our sample period. The relative
responses of stock market returns to oil price movements at the country level may be attributed to the
varying degree of a country's dependence on oil, differences in legal and regulatory conditions, and the
efficiency of emerging capital markets in the GCC region.

5.2. Asymmetric impact of oil price shocks on equity returns at the country level

As mentioned above, model (4) does not differentiate between the stock market response to rising oil
prices and the stock market response to falling oil prices during our sample period. Therefore, we test the
null hypothesis that rising and falling oil prices symmetrically influence stock returns across GCC countries
using model (5). The results related to the asymmetric impact of oil price changes on stock market returns
in GCC countries are reported in Table 3. Our findings show that oil price changes asymmetrically affect
stock market returns across all GCC countries. In particular, column (4) in Table 3 shows that a decrease in
oil price is significantly and positively related to stock market returns across all six GCC countries,
indicating that a decline in oil price has a significant negative impact on stock market returns. In contrast,
results reported in column (3) of Table 3 indicate that an increase in oil price has mixed effects on stock
market returns. While an increase in oil price has a significant positive impact on stock returns for United
Arab Emirates and Saudi Arabia, oil price increases have no discernible impact on stock market returns of
Bahrain, Oman and Kuwait. We also test the null hypothesis that stock market responses to oil price
changes are equal for both rising and falling oil prices. As can be seen from column (7) in Table 3, the Wald
test rejects the null of equality, H01γui = γdi, for two countries (Bahrain and Kuwait), indicating an
asymmetric impact of oil shocks on stock market returns. Thus, our findings suggest that stock market
exposures to oil price changes are not equal for both rising and falling oil prices across GCC countries. These

Table 2
Effects of oil price shocks on GCC stock markets.

Market Intercept Global Oil price Adj. R2 DW

αi0 βw βOil

Bahrain −0.0056⁎⁎ 0.1515 0.1245⁎ 0.0338 1.9355

(− 2.36) (1.15) (1.82)
Kuwait −0.0014 0.3361** 0.1327 0.0658 2.0307
(− 0.50) (2.58) (1.58)
Oman −0.0015 0.4425*** 0.2943⁎⁎⁎ 0.2022 2.3936
(− 0.58) (3.07) (3.43)
Qatar −0.0016 0.6384*** 0.2751⁎⁎ 0.1863 2.2323
(− 0.51) (4.38) (2.55)
UAE −0.0053 0.6774*** 0.4385⁎⁎⁎ 0.1877 2.1255
(− 1.29) (3.43) (3.68)
Saudi Arabia −0.0033 0.4601*** 0.2907⁎⁎⁎ 0.1278 1.8716
(− 1.00) (3.35) (3.74)

Note: t-statistics are reported in parentheses. ⁎⁎⁎indicates significance at the 1% level, ⁎⁎ indicates significance at the 5% level,
⁎indicates significance at the 10% level.
∼ ∼
Basic model: Ri;mt = αi0 + β w + β Oil Roilt + ∼εit .
∼
Ri:mt = the weekly return on the stock market index for country i at time t, derived as the log difference in price level of the market
∼
portfolio for country i over week t (ln Pit − ln Pi,t − 1); Ri;mt = the weekly return on the world stock market index at time t, derived as
∼
the log difference in price level of world stock market index over week t; and Roil;t = the weekly return on oil price at time t, derived
as the log difference in oil price index values at the end and beginning of week t.
 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55 51

Table 3
Asymmetric effects of oil price shocks on GCC stock markets.

Market Global Oil up Oil down Adj. R2 DW H01: γui = γdi H02: γui = γdi = 0
βw γui(t-stat) γdi(t-stat) (p-value) (p-value)

Bahrain 0.1070 −0.0283 0.2575** 0.0461 1.9864 3.102737 2.625834

(0.85) (− 0.37) (2.22) (0.0795) (0.0745)
Kuwait 0.2695** −0.0958 0.3316** 0.0905 2.1321 5.894190 3.828075
(2.24) (− 1.01) (2.77) (0.0159) (0.0231)
Oman 0.3945*** 0.1294* 0.4378** 0.2135 2.4235 2.467185 11.45764
(2.92) (1.92) (2.84) (0.1176) (0.0000)
Qatar 0.6039*** 0.1564 0.3784*** 0.1881 2.2176 0.651822 6.100373
(4.35) (0.89) (2.60) (0.4203) (0.0026)
UAE 0.6406*** 0.3123*** 0.5483*** 0.1878 2.1203 0.792021 12.14252
(3.55) (2.72) (2.76) (0.3744) (0.0000)
Saudi Arabia 0.4539*** 0.2695** 0.3092** 0.1243 1.8696 0.032119 8.186470
(3.18) (2.05) (2.33) (0.8579) (0.0004)

Note: t-statistics are reported in parentheses. ⁎⁎⁎indicates significance at the 1% level, ⁎⁎ indicates significance at the 5% level,
⁎indicates significance at the 10% level.
∼ ∼ ∼
Model: Rmt = αi0 + βw + γui D × Roilt + γdi ð1−DÞ × Roilt + ∼εit .
∼
Ri:mt = the weekly return on the stock market index for country i at time t, derived as the log difference in price level of the market
∼
portfolio for country i over week t (ln Pit − ln Pi, t − 1); Ri;mt = the weekly return on the world stock market index at time t, derived as
∼
the log difference in price level of world stock market index over week t; and Roil;t = the weekly return on oil price at time t, derived
as the log difference in oil price index values at the end and beginning of week t. D is a dummy variable that takes the value of unity if
the change in the oil price is positive and D = 0 otherwise; γui and γdi are indicative of market index returns of the i-th country,
corresponding to up and down movements in the oil price factor, respectively.

results are consistent with the explanation that a fall in oil price can induce resource reallocation in oil
exporting economies and, in turn, can have a significant adverse impact on consumer demand. As a result, a
decline in oil price may eventually affect aggregate corporate cash flows and profits, leading to lower stock
returns.

5.3. Impact of oil price shocks on equity returns at the industry level

The analysis at the country level suggests that oil price changes have significant impacts on stock
market returns for all six GCC countries, except for Kuwait. However, this might not be the case for
individual industry returns within each country. We examine how different the responses of stock returns
to oil price changes are across industries for four GCC countries (Bahrain, Kuwait, Oman, and Qatar). This
analysis also helps address whether a particular industry would gain or lose due to changes in oil prices
(e.g. Lee and Ni (2002)).
The impact of oil shocks on equity returns at the industry level is estimated based on model (6) and the
results are reported in Table 4. Column (4) shows that the relation between oil prices and industry returns
is positive and significant for 11 out of 20 industries. Our results reported in Table 4 suggest that oil price
exposures vary across industries as well as across countries in the GCC region. However, a closer look at our
results indicates that only the commercial banking sector has a positive and significant exposure across all
four GCC countries. This is not surprising because the commercial banking sector is a major component of
equity shares and economies of GCC countries. In the case of Bahrain, only the commercial banking
industry has a significant positive oil exposure, while three out of seven industries in Kuwait (commercial
banking, investment, and industrial) have positive and significant exposures at the 5% level. Surprisingly,
all three industries in Oman (banking and investments, industrial, and services & insurance) as well as all
four industries in Qatar (banking & financial, industrial, insurance, and services) have positive oil
exposures that are significant at the 1% level. Thus, the positive relation between oil prices and equity
returns for several industries in GCC countries suggests that the responses of stock market returns depend
on possible shifts in demand for consumer services. Overall, the industry-level response patterns are
consistent with the expectation that an increase in oil price drives the demand for industry products and
services (demand-side effects) in oil exporting countries instead of an increased cost of oil (cost-side
effects).
52 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55

Table 4
Industries' sensitivities to oil price changes.

Industry αi 0 βm βOil AR(1)a Adj.R2 DW

Bahrain
Commercial banks −0.0018 0.4070⁎⁎⁎ 0.1433⁎⁎⁎ −0.1347⁎⁎ 0.3045 2.0336
(− 1.31) (7.15) (5.07) (− 1.97)
Hotel and tourism 0.0018⁎⁎ 0.0094 0.0143 – −0.0048 2.0724
(2.03) (0.47) (0.83) –
Industrial 0.0002 0.0047 0.0154 – −0.0063 1.8170
(0.15) (0.22) (0.91) –
Insurance −0.0008 0.0518⁎⁎ 0.0077 – 0.0035 1.8975
(− 0.73) (2.37) (0.46) –
Investment −0.0015 0.2876⁎⁎⁎ 0.0199 – 0.2149 1.9660
(− 1.19) (4.38) (0.89) –
Services −0.0024 0.3667⁎⁎⁎ 0.0212 – 0.2833 1.9508
(− 1.77) (4.28) (0.74) –

Kuwait
Banks 0.0016 0.6576⁎⁎⁎ 0.1205⁎⁎⁎ −0.3870⁎⁎⁎ 0.5725 1.9524
(1.32) (15.22) (3.50) (− 2.94)
Food −0.0003 0.4712⁎⁎ 0.1001 −0.7039⁎⁎⁎ 0.4891 2.2347
(− 0.04) (2.36) (0.37) (− 4.65)
Industrial −0.0004 0.6810⁎⁎⁎ 0.2419⁎⁎⁎ −0.6935⁎⁎⁎ 0.5231 2.0812
(− 0.14) (6.74) (2.75) (− 4.84)
Insurance 0.0006 −0.0074 0.0676 −0.6657⁎⁎⁎ 0.4356 2.2555
(0.08) (− 0.05) (0.30) (− 3.96)
Investment −0.0024 0.6853⁎⁎⁎ 0.1128⁎⁎ −0.6554⁎⁎⁎ 0.5032 2.0059
(− 1.48) (11.89) (2.05) (− 5.08)
Real estate −0.0028 0.6607⁎⁎⁎ 0.1375⁎ −0.6368⁎⁎⁎ 0.4273 2.1888
(− 0.80) (9.29) (1.72) (− 3.64)
Services −0.0009 0.5679⁎⁎⁎ 0.2144 −0.7007⁎⁎⁎ 0.4955 2.2348
(− 0.15) (3.76) (1.15) (− 4.82)

Oman
Banking & investments 0.0008 0.9215⁎⁎⁎ 0.3010⁎⁎⁎ −0.1729⁎⁎⁎ 0.7472 2.0337
(0.62) (22.95) (11.55) (− 2.71)
Industrial 0.0019 0.9042⁎⁎⁎ 0.3443⁎⁎⁎ – 0.6453 1.9066
(0.99) (15.15) (8.34)
Services & insurance 0.0011 0.7420⁎⁎⁎ 0.2119⁎⁎⁎ – 0.7461 2.1465

Qatar
Banking & financial −0.0014 1.0020⁎⁎⁎ 0.2780⁎⁎⁎ – 0.8925 1.9190
(− 1.23) (39.10) (13.83) –
Industrial −0.0015 1.1267⁎⁎⁎ 0.3277⁎⁎⁎ – 0.8315 2.0501
(− 0.92) (27.72) (7.73) –

Insurance −0.0038 0.7801⁎⁎⁎ 0.2955⁎⁎⁎ – 0.5088 2.0766

(− 1.46) (12.05) (4.84) –
Services −0.0020 0.7952⁎⁎⁎ 0.2477⁎⁎⁎ – 0.7755 2.1735
(− 1.40) (18.73) (8.14) –

Note: t-statistics are reported in parentheses. ⁎⁎⁎indicates significance at the 1% level, ⁎⁎ indicates significance at the 5% level,
⁎indicates significance at the 10% level.
∼ ∼O ∼
Model: Rit = αi0 + βm Rmt + βOil Roilt + ∼εit .
∼
Ri:t = the weekly return on the industry return index, i at time t, derived as the log difference in price level of the industry portfolio for
∼O ∼
industry i over week t (ln Pit − ln Pi, t − 1); Rmt = the weekly return on the orthogonalized stock market index at time t, and Roil;t = the
weekly return on oil price at time t, derived as the log difference in oil price index values at the end and beginning of week t. The
coefficient AR(1) is an estimate of the first-order autoregressive coefficient produced by the Cochrane–Orcutt procedure [AR(1)] for
those instances in which significant autocorrelations are detected according to the Durbin–Watson test in the original regression.

5.4. Asymmetric impact of oil price shocks on equity returns at the industry level

Model (6) does not differentiate between the stock market responses to rising oil prices and the stock
market responses to falling oil prices across industries. Therefore, we test the null hypothesis that rising
 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55 53

Table 5
Asymmetric effects of oil price changes on industries' returns.

Industry Oil up Oil down AR(1) Adj. R2 DW H01: γui = γdi H02: γui = γdi = 0
γui (t-stat) γdi (t-stat) (p-value) (p-value)

Bahrain
Commercial banks 0.0334 0.2365⁎⁎⁎ −0.1380⁎⁎ 0.3167 2.0388 6.6656⁎⁎ 17.1984⁎⁎⁎
(0.68) (5.16) (− 2.03) (0.0104) (0.0000)
Hotel and tourism −0.0124 0.0376 – −0.0051 2.0634 1.0525 0.7346
(− 0.44) (1.21) – (0.3060) (0.4808)
Industrial −0.0372 0.0612 – −0.0013 1.8134 1.7881 1.0047
(− 1.00) (1.42) – (0.1824) (0.3677)
Insurance −0.0015 0.0157 – −0.0005 1.8965 0.1233 0.1557
(− 0.05) (0.54) – (0.7258) (0.8559)
Investment −0.0159 0.0510 – 0.2141 1.9933 0.9634 0.6795
(− 0.44) (1.16) – (0.3273) (0.5079)
Services −0.0079 0.0465 – 0.2816 1.9390 0.3044 0.3214
(− 0.15) (0.76) – (0.5817) (0.7255)

Kuwait
Banks 0.0696 0.1616⁎⁎⁎ −0.3832⁎⁎⁎ 0.5727 1.9522 1.1727 6.3475⁎⁎
(1.58) (2.63) (− 2.91) (0.2800) (0.0021)
Food −0.2139 0.3494 −0.7068⁎⁎⁎ 0.4888 2.2473 0.9305 0.4711
(− 0.60) (0.83) (− 4.71) (0.3357) (0.6249)
Industrial 0.2430⁎⁎ 0.2409⁎ −0.6935⁎⁎⁎ 0.5211 2.0814 0.0001 3.9820⁎⁎
(1.99) (1.78) (− 4.84) (0.9911) (0.0199)
Insurance −0.2406 0.3126 −0.6685⁎⁎⁎ 0.4351 2.2683 0.7206 0.3675
(− 0.63) (0.78) (− 3.95) (0.3968) (0.6928)
Investment −0.0255 0.2225⁎⁎⁎ −0.6649⁎⁎⁎ 0.5097 2.0104 3.7190 3.3749⁎⁎
(− 0.33) (2.58) (− 5.31) (0.0550) (0.0359)
Real estate 0.0620 0.1974 −0.6365⁎⁎⁎ 0.4255 2.1844 0.2467 1.5329
(0.40) (1.24) (− 3.63) (0.6199) (0.2181)
Services 0.2478 0.1879 −0.7010⁎⁎⁎ 0.4933 2.2365 0.0192 0.7529
(0.93) (0.63) (− 4.82) (0.8899) (0.4722)

Oman
Banking & investments 0.2851⁎⁎⁎ 0.3143⁎⁎⁎ −0.1712⁎⁎⁎ 0.7463 2.0335 0.1262 67.8160⁎⁎⁎
(5.74) (6.64) (− 2.66) (0.7227) (0.0000)
Industrial 0.2891⁎⁎⁎ 0.3924⁎⁎⁎ – 0.6450 1.9114 0.7861 37.3394⁎⁎⁎
(4.50) (5.16) – (0.3762) (0.0000)
Services & insurance 0.1761⁎⁎⁎ 0.2430⁎⁎⁎ – 0.7460 2.1636 1.0138 38.2520⁎⁎⁎
(5.60) (4.84) – (0.3150) (0.0000)

Qatar
Banking & financial 0.3148⁎⁎⁎ 0.2459⁎⁎⁎ – 0.8925 1.9206 1.3480 93.2353⁎⁎⁎
(7.75) (7.85) – (0.2468) (0.0000)
Industrial 0.3249⁎⁎⁎ 0.3301⁎⁎⁎ – 0.8308 2.0488 0.0018 35.988⁎⁎⁎
(5.29) (3.91) – (0.9663) (0.0000)
Insurance 0.1854⁎ 0.3914⁎⁎⁎ – 0.5104 2.0607 1.4456 11.8123⁎⁎⁎
(1.91) (3.51) – (0.2304) (0.0000)
Services 0.2078⁎⁎⁎ 0.2824⁎⁎⁎ – 0.7752 2.1769 0.6786 33.6582⁎⁎⁎
(3.79) (5.25) − (0.4109) (0.0000)
∼ ∼O ∼ ∼ ∼
Model: Rit = αi0 + βm Rmt + γui D × Roilt + γdi ð1−DÞ × Roilt + εit .
∼
Ri:mt = the weekly return on the stock market index∼for country i at time t, derived as the log difference in price level of the market
O
portfolio for country i over week t (ln Pit − ln Pi, t − 1); Rmt = the weekly return on the orthogonalized stock market index at time t, and
∼
Roil;t = the weekly return on oil price at time t, derived as the log difference in oil price index values at the end and beginning of week t.
D is a dummy variable that takes the value of unity if the change in the oil price is positive and D = 0 otherwise; γui and γdi are indicative
of industry portfolio returns of the i-th industry, corresponding to up and down movements in the oil price factor, respectively. The
coefficient AR(1) is an estimate of the first-order autoregressive coefficient produced by the Cochrane–Orcutt procedure [AR(1)] for
those instances in which significant autocorrelations are detected according to the Durbin–Watson test in the original regression.

and falling oil prices symmetrically influence stock returns across industries using model (7). A reasonable
approach to study the asymmetric impact of oil price changes on industry returns is to focus on the
industries that have significant oil exposures. To formally test whether oil exposure coefficients are equal
54 S.K. Mohanty et al. / Global Finance Journal 22 (2011) 42–55

for both rising (oil up) and falling (oil down) oil prices, we use H01: γui = γdiin equation (7). As can be seen
from column (7) in Table 5, results based on Wald test statistics suggest that the null hypothesis of the
equal oil exposure coefficient cannot be rejected except for one industry (the commercial banking industry
in Bahrain). Overall results, in general, indicate that there is no significant asymmetric impact of oil price
shocks on stock returns at the industry level.

6. Conclusions

Consistent with modern finance literature (e.g. Huang et al. (1996); Jones and Kaul (1996); Driesprong
et al. (2008); and Kilian and Park (2009)), we have developed a theoretic link between oil prices and stock
prices in oil exporting GCC countries, and we empirically test the relation between the two variables. We
argue that changes in oil prices are likely to have significant effects on GCC countries' real economies and
stock markets through various channels due to changes in marginal costs of production (cost-side effects),
as well as possible shifts in consumer expenditures (demand-side effects).
This study examines the relation between oil prices and stock market returns of six GCC countries,
namely, Bahrain, Kuwait, Oman, Qatar, UAE, and Saudi Arabia. The country-level analysis shows that there
exists a significant positive relation between oil price changes and stock market returns in GCC countries,
except for Kuwait, during the June 2005–December 2009 period. These results are consistent with findings
of prior studies (Bekaert and Harvey (2002); Bruner, Conroy, Estrada, Kritzman, and Li (2002)), which
suggests that stock markets in emerging countries operate under a different set of market forces,
competitive environments, and government regulations. Our study finds that oil price exposures of stock
markets in all six GCC countries are significantly positive to oil price decreases indicating that a decline in
oil price has a negative impact on stock market returns in GCC countries. In contrast, an increase in oil price
has significant positive impact on stock market returns for two out of six GCC countries (UAE and Saudi
Arabia), indicating an asymmetric impact of oil price shocks on stock markets in GCC countries.
Using the DataStream equity indices for industries, we conduct an industry-level analysis of four GCC
countries (Bahrain, Kuwait, Oman, and Qatar). Our results show that 12 out of 20 industries in the GCC
countries have significant positive exposures to oil shocks over the June 2005–December 2009 period. We
show that the response of industry returns to oil price shocks differs substantially across industries and
countries within the GCC region.

Acknowledgements

We would like to thank Manuchehr Shahrokhi (the editor), and three anonymous referees for their
many helpful suggestions and comments. We also would like to thank session participants at the 18th
Annual Conference on Pacific Basin Finance, Economics, Accounting and Management in Beijing, China for
their comments. We also thank Jing Zhang for the excellent research assistance.

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