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Oil Volatility Spillover into Oil Dependent Equity-Sector Stock Returns: Evidence from Major Oil Producing Countries

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  • Rafiqul Bhuyan
  • Mohammad Robbani
  • Bakhtear Talukder

Abstract

In this paper, we study the effects of oil price volatility on the stock market relevant sectors from several oil producing countries. We investigate the interdependence between oil prices and sector stock indices within OPEC markets and selected major non-OPEC countries such as Russia and United States. By exploring the time-varying dynamics of oil prices and sector-stock indices on the sectoral reaction to oil price shocks we investigate how the shocks in oil prices affect the correlation dynamics of the different sectors. Our study finds that different sectors display heterogeneous dynamic correlation pattern with different oil price shocks origins in different countries. Specifically, the GARCH coefficients in several sectors, such as, industrial, energy and healthcare in some of oil-producing middle-eastern countries are not significant. In addition, the negative coefficients for some sectors in some of the countries indicate the existence of hedging opportunities for portfolio managers.

Suggested Citation

  • Rafiqul Bhuyan & Mohammad Robbani & Bakhtear Talukder, 2021. "Oil Volatility Spillover into Oil Dependent Equity-Sector Stock Returns: Evidence from Major Oil Producing Countries," Bulletin of Applied Economics, Risk Market Journals, vol. 8(1), pages 149-165.
    • Handle: RePEc:rmk:rmkbae:v:8:y:2021:i:1:p:149-165
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    More about this item

    Keywords

    commodity markets; financial markets; time-varying volatility; conditional correlations;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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