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Do market conditions interfere with the transmission of uncertainty from oil market to stock market? Evidence from a modified quantile-on-quantile approach

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  • Xie, Qichang
  • Tang, Guoqiang

Abstract

This paper explores the asymmetric and dynamic effects of oil market uncertainty on stock market uncertainty in BRICS countries. To highlight this issue, we propose a modified quantile-on-quantile method by remedying two significant deficiencies of the current quantile-on-quantile approach that has been widely deployed recently. The results show that the influences of oil market uncertainty on BRICS equity market uncertainty are overall positive and asymmetric across various market circumstances. When oil and stock markets are both in bear market conditions, the impacts of uncertainty regarding the oil market on stock markets are more pronounced. Moreover, this asymmetric relationship is significantly heterogeneous across BRICS countries. Dynamic analysis confirms that oil market uncertainty has a time-varying shock on stock market uncertainty. Our study has momentous implications for investors and policymakers attempting to guard against uncertainty in oil and stock markets.

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  • Xie, Qichang & Tang, Guoqiang, 2022. "Do market conditions interfere with the transmission of uncertainty from oil market to stock market? Evidence from a modified quantile-on-quantile approach," Energy Economics, Elsevier, vol. 114(C).
    • Handle: RePEc:eee:eneeco:v:114:y:2022:i:c:s0140988322003929
    DOI: 10.1016/j.eneco.2022.106250
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    More about this item

    Keywords

    Asymmetric and dynamic effects; BRICS; Oil price uncertainty; Quantile-on-quantile; Stock market volatility;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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