Shock and volatility spillovers between oil and emerging seven stock markets

Abstract

Purpose This study aims to examine the volatility spillover effects between oil and stock returns in the emerging seven economies. Design/methodology/approach In this study, the Granger causality test and vector autoregression-generalized autoregressive conditional heteroskedasticity approach to analyze the volatility spillover from 1995 to 2019 were used. The findings provide evidence of significant volatility spillover between oil and Brazil, China, India, Indonesia, Mexico, Russia and Turkey (E7) stock markets. Findings All emerging seven stock markets exhibit positive and low constant conditional correlations with oil assets. The magnitude of the correlation changes in respond to the country’s net position in the crude oil market. While a relatively high level of correlation exists between oil and the stock markets of net oil-exporting countries, a relatively low level of correlation exists between oil and the stock markets of net oil-importing countries. Originality/value The findings suggest that oil asset improves the risk-adjusted performance of a well-diversified portfolio of stocks. However, investors should invest a larger portion of their portfolios in E7 stock markets than in oil.

Shock and Volatility Spillovers between Crude Oil Price and Stock Returns: Evidence for Thailand

“…Gomes and Chaibi (2014) find mixed results for 23 stock markets, but the spillovers run more often from oil to stock markets. Other recent studies find unilateral shock and volatility spillover from oil price to stock market returns (Anan et al, 2014;Bouri, 2015;Amed, 2017;Kurshid and Uludag, 2017;Uludag and Safarzadeh, 2018;and Chen et al, 2018). These studies find unilateral transmission for India, Lebanon, Egypt, some Balkan stock markets, and China.…”

Connectedness of International Stock Market at Major Public Events: Empirical Study via Dynamic Time Warping-Based Network

“…Te international stock market plays an important role in the fnancial system. One strand of the literature on the connectedness within the international stock market focuses on the transmission between two important countries [6][7][8][9][10], the connectivity among countries participating in international organizations such as the G7 [11][12][13], and the dependence between the stock market and other markets, such as exchange markets [14,15], the crude oil market [16][17][18], markets for other commodities [19][20][21], and cryptocurrencies [22][23][24]. Prior works adopt the GARCH family model, the VAR model, and the Copula model to analyze the time-varying correlations between fnancial markets, and they emphasize the efects of policy factors (e.g., changes in monetary policy or regime) and national economy factors (e.g., fnancial and trade linkages) on connectedness among stock markets.…”

Impact of Environmental Fluctuations on Stock Markets: Empirical Evidence from South Asia

“…A growing body of literature has discussed the volatility spillover from energy consumption to stock markets in developed and developing countries [8][9][10][11][12][13][14]. e primary study in this regard was stepped by Hamilton [15] by focused on the impact of oil prices on the economy of the U.S. and found that sharp fluctuation in oil prices has a significant impact on the economy.…”

“…After examining all these studies, a mixed conclusion can be drawn because some studies suggest that the volatility is transmitted from the oil market to the stock markets of different countries; on the other hand, some studies prove that there is no transmittal of volatility from the market of oil to the stock of different countries. e findings vary from country to country and analyzed periods [17][18][19][20][21]. is difference in findings may be due to the methodology, model, time, or data set.…”