Studies from Al Ain University in the Area of Risk Management Described (Dynamic Shock-Transmission Mechanism Between U.S. Trade Policy Uncertainty and Sharia-Compliant Stock Market Volatility of GCC Economies): Insurance – Risk Management

Insurance Daily News

2025 APR 07 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Investigators publish new report on risk management. According to news originating from Al Ain University by NewsRx correspondents, research stated, “This study endeavors to explore the shock-transmission mechanism between Trade Policy Uncertainty (TPU) and the volatility inherent in the Gulf Cooperation Council (GCC) Islamic stock markets by employing the novel Quantile Vector Auto Regression (QVAR) with ‘Extended Joint’ and ‘Frequency’ domain connectedness technique.”

Our news journalists obtained a quote from the research from Al Ain University: “Overall findings indicated a U-shaped pattern in the shock-transmission mechanism with the higher TPU shocks transmitted towards Islamic stock market volatility at the extreme quantiles and in the long term. The ‘Extended Joint’ QVAR connectedness approach highlights that, in bearish and moderate-volatility conditions (* * t* * = 0.05, 0.50), diversifying portfolios across less shock-prone equity markets like Qatar and UAE can mitigate risk exposure to TPU shocks. Specific economies receiving higher TPU shocks, like Bahrain, Kuwait, and Saudi Arabia, should implement strategic frameworks, including trade credit insurance and currency hedging, for risk reduction in trade policy shocks during the bearish and moderate-volatility conditions. Conversely, Qatar and Kuwait show the least transmission of error variance from TPU during higher-volatility conditions (* * t* * = 0.95). Moreover, the application of the Frequency-domain QVAR technique underscores the need for short-term speculators to exercise increased vigilance during bearish and bullish volatile periods, as TPU shocks can exert a more substantial influence on the Islamic equity market volatility of Bahrain, Oman, Kuwait, and Saudi Arabia.”

According to the news reporters, the research concluded: “Long-term investors may need to tailor their asset-allocation strategies by increasing allocations to more stable assets that are less susceptible to TPU shocks, such as Qatar, during bearish (* * t* * = 0.05), moderate (* * t* * = 0.50), and bullish (* * t* * = 0.95) volatility.”

For more information on this research see: Dynamic Shock-Transmission Mechanism Between U.S. Trade Policy Uncertainty and Sharia-Compliant Stock Market Volatility of GCC Economies. Risks, 2025,13(3):56. (Risks - http://www.mdpi.com/journal/risks). The publisher for Risks is MDPI AG.

A free version of this journal article is available at https://doi.org/10.3390/risks13030056.

Our news editors report that additional information may be obtained by contacting Mosab I. Tabash, Department of Business Administration, College of Business, Al Ain University, Al Ain P.O. Box 64141, United Arab Emirates. Additional authors for this research include Suzan Sameer Issa, Marwan Mansour, Mohammed W. A. Saleh, Maha Rahrouh, Kholoud AlQeisi, Mujeeb Saif Mohsen Al-Absy.