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Oil price asymmetric effects: Answering the puzzle in international stock markets

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  • Ramos, Sofia B.
  • Veiga, Helena

Abstract

Although studies have found an asymmetric pattern in the response of aggregate output to oil price changes, parallel studies in stock markets have not been conclusive about their existence. This paper finds evidence that effects for oil-importing and oil-exporting countries run in opposite directions. Oil price hikes have a negative effect on the stock markets of oil-importing countries, while the impact is positive for the stock markets of oil-exporting countries. Statistical tests support the presence of asymmetric effects only in oil-importing countries. Oil price volatility has a negative impact in stock markets of oil-importing countries and positive in oil-exporting countries. Moreover, oil volatility seems to be affected asymmetrically by oil price changes. Oil price drops increase oil volatility more than oil price hikes do. Overall, the evidence seems to support that falls in oil prices do not impact stock markets because their positive effects are offset by negative effects of oil price volatility, canceling out effects for oil-importing countries.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 38 (2013)
Issue (Month): C ()
Pages: 136-145

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Handle: RePEc:eee:eneeco:v:38:y:2013:i:c:p:136-145

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Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Asymmetric effects; International stock markets; Oil prices; Panel data; Oil price volatility;

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References

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Cited by:
  1. Sofía B. Ramos & Helena Veiga & Pedro Latoeiro, 2013. "Predictability of stock market activity using Google search queries," Statistics and Econometrics Working Papers ws130605, Universidad Carlos III, Departamento de Estadística y Econometría.
  2. Belén Martín-Barragán & Sofía B. Ramos & Helena Veiga, 2013. "Correlations between oil and stock markets : a wavelet-based approach," Statistics and Econometrics Working Papers ws130504, Universidad Carlos III, Departamento de Estadística y Econometría.

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