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Exploring the sensitivity of BRICS stock markets to oil Price shocks: a quantile-on-quantile perspective

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  • Bonga-Bonga, Lumengo

Abstract

This paper evaluates the impact of varying magnitudes of oil price shocks on the equity market returns in BRICS countries under diverse market conditions using quantile-on-quantile regression analysis. Uniquely, unlike previous studies, this paper differentiates between demand and supply oil price shocks, under the assumption of a perfectly elastic oil supply. This assumption is grounded in a structural vector autoregressive (SVAR) framework, enhancing the analysis's precision in identifying the specific nature of oil price shocks. The empirical findings reveal that the impact of demand oil price shocks on the equity markets of BRICS nations varies according to the resource endowment of each country, showing distinct effects between countries with greater and lesser resource endowments. Additionally, the influence of supply oil price shocks on equity markets differs based on the market conditions, specifically whether the countries are net oil importers or exporters. These findings offer critical insights for policymakers and investors in BRICS countries, enabling the development of economic and business strategies that are closely aligned with the unique economic conditions and characteristics of each nation.

Suggested Citation

  • Bonga-Bonga, Lumengo, 2024. "Exploring the sensitivity of BRICS stock markets to oil Price shocks: a quantile-on-quantile perspective," MPRA Paper 120190, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:120190
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    More about this item

    Keywords

    oil price shocks; stock markets; BRICS; quantile-on-quantile;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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