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This article investigates return and volatility spillover effects between Dubai Financial Market (DFM) and Abu Dhabi Stock Exchange (ADSE) using two methodologies: A simple asymmetric Vector Autoregressive-Baba, Engle, Kraft, Kroner (VAR-BEKK) framework introduced by Kroner and Ng (1998), and an asymmetric version of the Dynamic Conditional Correlation (DCC) model proposed by Engle (2002). We find that return and volatility transmission mechanisms between DFM and ADSE in the UAE are asymmetric. In particular, there are significant spillover effects in both returns and volatility from DFM to ADSE. The DFM is playing the dominant role, and the feedback effect from ADSE to DFM is relatively weak, albeit significant. These results are consistent with an exchange market in which information is first incorporated into the DFM before being impounded into the ADSE.
