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Oil price asymmetric effects: Answering the puzzle in international stock markets

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  • Ramos, Sofia B.
  • Veiga, Helena

Abstract

Although studies have found an asymmetric pattern in the response of aggregate output to oil price changes, parallel studies in stock markets have not been conclusive about their existence. This paper finds evidence that effects for oil-importing and oil-exporting countries run in opposite directions. Oil price hikes have a negative effect on the stock markets of oil-importing countries, while the impact is positive for the stock markets of oil-exporting countries. Statistical tests support the presence of asymmetric effects only in oil-importing countries. Oil price volatility has a negative impact in stock markets of oil-importing countries and positive in oil-exporting countries. Moreover, oil volatility seems to be affected asymmetrically by oil price changes. Oil price drops increase oil volatility more than oil price hikes do. Overall, the evidence seems to support that falls in oil prices do not impact stock markets because their positive effects are offset by negative effects of oil price volatility, canceling out effects for oil-importing countries.

Suggested Citation

  • Ramos, Sofia B. & Veiga, Helena, 2013. "Oil price asymmetric effects: Answering the puzzle in international stock markets," Energy Economics, Elsevier, vol. 38(C), pages 136-145.
  • Handle: RePEc:eee:eneeco:v:38:y:2013:i:c:p:136-145
    DOI: 10.1016/j.eneco.2013.03.011
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    Cited by:

    1. Huang, Shupei & An, Haizhong & Gao, Xiangyun & Sun, Xiaoqi, 2017. "Do oil price asymmetric effects on the stock market persist in multiple time horizons?," Applied Energy, Elsevier, vol. 185(P2), pages 1799-1808.
    2. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2017. "The impact of oil-market shocks on stock returns in major oil-exporting countries: A Markov-switching approach," MPRA Paper 81638, University Library of Munich, Germany.
    3. Li, Lei & Yin, Libo & Zhou, Yimin, 2016. "Exogenous shocks and the spillover effects between uncertainty and oil price," Energy Economics, Elsevier, vol. 54(C), pages 224-234.
    4. Magali Dauvin, 2014. "Energy prices and the real exchange rate of commodity-exporting countries," International Economics, CEPII research center, issue 137, pages 52-72.
    5. Ali, Mohsin & Masih, Mansur, 2014. "Does Indian Stock Market Provide Diversification Benefits Against Oil Price Shocks? A Sectoral Analysis," MPRA Paper 58828, University Library of Munich, Germany.
    6. Martín-Barragán, Belén & Ramos, Sofia B. & Veiga, Helena, 2015. "Correlations between oil and stock markets: A wavelet-based approach," Economic Modelling, Elsevier, vol. 50(C), pages 212-227.
    7. Jozef Baruník, Evzen Kocenda and Lukáa Vácha, 2015. "Volatility Spillovers Across Petroleum Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    8. Latoeiro, Pedro & Ramos, Sofía B. & Veiga, Helena, 2013. "Predictability of stock market activity using Google search queries," DES - Working Papers. Statistics and Econometrics. WS ws130605, Universidad Carlos III de Madrid. Departamento de Estadística.
    9. repec:eee:eneeco:v:68:y:2017:i:c:p:1-18 is not listed on IDEAS

    More about this item

    Keywords

    Asymmetric effects; International stock markets; Oil prices; Panel data; Oil price volatility;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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