Financial integration of GCC capital markets: evidence of non-linear cointegration

This paper employs a non-parametric test to investigate non-linearity in the long-run equilibrium relationship between GCC stock markets returns. The results in the paper show strong evidence of bivariate and multivariate cointegration between five GCC stock markets. However, the Bahrain stock market is evidenced segmented from the group of GCC markets. It is indicated that there is bivariate non-linear cointegrating relationship linking the Kuwait stock market with each of Saudi and Dubai markets. Non-linearity is also realised between the Saudi market and each of the Dubai and Abu-Dhabi markets, as well as between the Muscat and the Kuwait stock markets.