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Oil price shocks and stock market volatility: evidence from European data

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  • Stavros Degiannakis

    ()
    (Bank of Greece)

  • George Filis

    (Bournemouth University)

  • Renatas Kizys

    (University of Portsmouth)

Abstract

The paper investigates the effects of oil price shocks on stock market volatility in Europe by focusing on three measures of volatility, i.e. the conditional, the realised and the implied volatility. The findings suggest that supply-side shocks and oil specific demand shocks do not affect volatility, whereas, oil price changes due to aggregate demand shocks lead to a reduction in stock market volatility. More specifically, aggregate demand oil price shocks have significant explanatory power on both current- and forward-looking volatilities. The results are qualitatively similar for aggregate stock market volatility and industrial sectors’ volatilities. Finally, a robustness exercise using short- and long-run volatility models supports the findings.

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Bibliographic Info

Paper provided by Bank of Greece in its series Working Papers with number 161.

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Length: 43
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:bog:wpaper:161

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Keywords: Conditional Volatility; Realised Volatility; Implied Volatility; Oil Price Shocks; SVAR;

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References

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Cited by:
  1. Nikolaos Antonakakis & Ioannis Chatziantoniou & George Filis, 2014. "Dynamic Spillovers of Oil Price Shocks and Policy Uncertainty," Department of Economics Working Papers wuwp166, Vienna University of Economics, Department of Economics.

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