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Asymmetric effects of oil price fluctuations in international stock markets

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  • Sofía B. Ramos

    ()

  • Helena Veiga

    ()

Abstract

New evidence on the way oil price fluctuations affect international stock markets is provided in analysis of the exposure of 43 stock markets. Oil price spikes depress international stock markets, but oil price drops do not necessarily increase stock market returns. Moreover, the volatility of oil prices has a negative impact on international stock market returns. Both these effects apply only to stock markets of developed countries. Emerging market returns are not sensitive to oil price variations. In addition, the asymmetry of oil price changes impacts oil volatility; i.e., when oil prices soar, oil volatility also increases, while negative oil price changes dampen volatility. Finally, oil price fluctuations are a factor in creating downside risk for international country investment.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Estadística y Econometría in its series Statistics and Econometrics Working Papers with number ws100904.

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Date of creation: Feb 2010
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Handle: RePEc:cte:wsrepe:ws100904

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Keywords: Asymmetry; Multifactor asset pricing Models; Oil prices; Panel data; Quantile regression; Volatility;

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  7. Nathan S. Balke & Stephen P. A. Brown & Mine Yücel, 1999. "Oil price shocks and the U.S. economy: where does the asymmetry originate?," Working Papers 9911, Federal Reserve Bank of Dallas.
  8. G. Andrew Karolyi & Rene M. Stulz, 2002. "Are Financial Assets Priced Locally or Globally?," NBER Working Papers 8994, National Bureau of Economic Research, Inc.
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  12. Leonid Kogan & Dmitry Livdan & Amir Yaron, 2009. "Oil Futures Prices in a Production Economy with Investment Constraints," Journal of Finance, American Finance Association, vol. 64(3), pages 1345-1375, 06.
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