IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-20-00867.html
   My bibliography  Save this article

Time-varying dependence between stock markets and oil prices during COVID-19: The case of net oil-exporting countries

Author

Listed:
  • K.P. Prabheesh

    () (Indian Institute of Technology Hyderabad)

  • Bhavesh Garg

    () (Indian Institute of Technology Ropar)

  • Rakesh Padhan

    () (Indian Institute of Technology Hyderabad)

Abstract

This article provides an empirical investigation of the time-varying dependence between oil prices and stock markets in the top ten net oil-exporting countries. Using daily data focusing on COVID-19 period, we implement the DCC-GARCH to identify the dynamic dependence. Then, we apply structural break techniques to detect the shift in the dependence structure. We find that there exists a positive time-varying dependence between oil returns and stock returns during the ongoing COVID-19 pandemic wherein the breakpoints mostly coincided with the emergence of oil price war and global stock market crash. Overall, results imply that declining oil prices lead to a fall in stock returns due to lower future earnings for oil companies, exhibiting a signal of reduction in aggregate demand and economic activity in oil-exporting countries. Thus, the high positive co-movement may have ill-effects on portfolio diversification, as the latter will be less effective if the asset returns are highly correlated.

Suggested Citation

  • K.P. Prabheesh & Bhavesh Garg & Rakesh Padhan, 2020. "Time-varying dependence between stock markets and oil prices during COVID-19: The case of net oil-exporting countries," Economics Bulletin, AccessEcon, vol. 40(3), pages 2408-2418.
  • Handle: RePEc:ebl:ecbull:eb-20-00867
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2020/Volume40/EB-20-V40-I3-P210.pdf
    Download Restriction: no

    More about this item

    Keywords

    COVID-19; Stock Markets; Oil Prices; Pandemic;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F3 - International Economics - - International Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-20-00867. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.