Crude oil and equity market comovements among Asia's for little dragons countries. Evidence of unobserved components approach

This paper deals with long-and short-run comovements between crude oil price and selected emerging Asian equity markets qualified, Little dragons countries, by employing the ARDL approach to cointegration of Pesaran et al. (2001) and the unobserved components approach employed by Berger and Pozzi (2013) which deals with the country-specific crude oil effect and common crude oil risk. It is shown in the literature that these techniques enable to obtain reliable results and draw sharp conclusions in several application areas. The short and long run empirical results show evidence of decoupling structure between crude oil price and selected stock markets. The equity markets were heavily fallen at the beginning of the global financial crisis and express less volatility with less magnitude after the GFC crisis. Our findings have important implications for international portfolio diversification.