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Assessing the impacts of oil price fluctuations on stock returns in emerging markets

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  • Aloui, Chaker
  • Nguyen, Duc Khuong
  • Njeh, Hassen

Abstract

This paper investigates the effects of oil price shocks on stock market returns in emerging countries. It differs from previous works in three main aspects: i) we distinguish three groups of countries, the largest net-oil importing countries, the moderately oil-dependent countries, and the largest net-oil exporting countries; ii) The potential influence of bullish and bearish market conditions on the causal relationship between oil and stock returns is controlled for in our analysis; iii) The empirical investigation is based on an analysis of long-term correlation and a conditional multifactor pricing model. Using data from twenty-five emerging countries, our results suggest that oil price risk is significantly priced in emerging markets, and that the oil impact is asymmetric with respect to market phases.

Suggested Citation

  • Aloui, Chaker & Nguyen, Duc Khuong & Njeh, Hassen, 2012. "Assessing the impacts of oil price fluctuations on stock returns in emerging markets," Economic Modelling, Elsevier, vol. 29(6), pages 2686-2695.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:6:p:2686-2695
    DOI: 10.1016/j.econmod.2012.08.010
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    More about this item

    Keywords

    Oil shocks; Emerging market returns; Multifactor pricing model; Long-term correlations;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F30 - International Economics - - International Finance - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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