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Impact of oil volatility shocks on global emerging market stock returns

Author

Listed:
  • Probal Dutta
  • Md Hasib Noor
  • Anupam Dutta

Abstract

Purpose - The purpose of this paper is to investigate whether the crude oil volatility index (OVX) plays any key role in explaining the trend in emerging market stock returns from a global standpoint. Design/methodology/approach - At the empirical stage, different forms of the GARCH-jump model have been estimated. Findings - The findings confirm the effects of OVX on equity returns. In addition, the results document that there exist time-varying jumps in the stock market returns. Besides, the impacts of OVX shocks appear to be symmetric. The analysis further shows that the magnitude of OVX impact is marginally bigger than that of the conventional oil price shocks. Originality/value - Since various financial assets are traded on the basis of oil and equity markets, investors, for instance, could use the findings of this study for taking proper investment decisions and gaining better portfolio diversification benefits. Additionally, policymakers could utilize the results to develop effective measures and strategies in order to minimize the oil price risk.

Suggested Citation

  • Probal Dutta & Md Hasib Noor & Anupam Dutta, 2017. "Impact of oil volatility shocks on global emerging market stock returns," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 13(5), pages 578-591, August.
    • Handle: RePEc:eme:ijmfpp:ijmf-03-2017-0039
    DOI: 10.1108/IJMF-03-2017-0039
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    Citations

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    Cited by:

    1. Xie, Qichang & Wu, Haifeng & Ma, Yu, 2021. "Refining the asymctmetric impacts of oil price uncertainty on Chinese stock returns based on a semiparametric additive quantile regression analysis," Energy Economics, Elsevier, vol. 102(C).
    2. Zhifang He & Jiaqi Chen & Fangzhao Zhou & Guoqing Zhang & Fenghua Wen, 2022. "Oil price uncertainty and the risk‐return relation in stock markets: Evidence from oil‐importing and oil‐exporting countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1154-1172, January.
    3. Dutta, Anupam, 2018. "A note on the implied volatility spillovers between gold and silver markets," Resources Policy, Elsevier, vol. 55(C), pages 192-195.
    4. Dutta, Anupam, 2018. "Oil and energy sector stock markets: An analysis of implied volatility indexes," Journal of Multinational Financial Management, Elsevier, vol. 44(C), pages 61-68.
    5. Shrestha, Keshab & Philip, Sheena & Peranginangin, Yessy, 2020. "Contributions of Crude Oil Exchange Traded Funds in Price Discovery Process," American Business Review, Pompea College of Business, University of New Haven, vol. 23(2), pages 393-407, November.
    6. Xiao, Jihong & Zhou, Min & Wen, Fengming & Wen, Fenghua, 2018. "Asymmetric impacts of oil price uncertainty on Chinese stock returns under different market conditions: Evidence from oil volatility index," Energy Economics, Elsevier, vol. 74(C), pages 777-786.

    More about this item

    Keywords

    GARCH-jump model; Global emerging stock index; Oil volatility shocks; OVX; G1;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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