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Oil prices and stock markets: Does the effect of uncertainty change over time?

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  • Joo, Young C.
  • Park, Sung Y.

Abstract

This paper investigates empirical marginal effects of uncertainty measured by conditional variance of the stock and crude oil prices on their returns using stock index prices for U.S., Japan, Korea, and Hong Kong over the period 1996–2015. A time-varying parameter model with a dynamic conditional correlation (DCC) bivariate GARCH-in-Mean specification is considered to investigate time-varying marginal effects of uncertainty on the stock and crude oil returns. The empirical findings show that there exist significant negative time-varying effects of uncertainty on the returns over some sub-periods.

Suggested Citation

  • Joo, Young C. & Park, Sung Y., 2017. "Oil prices and stock markets: Does the effect of uncertainty change over time?," Energy Economics, Elsevier, vol. 61(C), pages 42-51.
    • Handle: RePEc:eee:eneeco:v:61:y:2017:i:c:p:42-51
    DOI: 10.1016/j.eneco.2016.10.017
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    References listed on IDEAS

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    More about this item

    Keywords

    Crude oil returns; Stock returns; Oil uncertainty; Bivariate GARCH-in-Mean model; Time-varying parameter;
    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
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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