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Crude oil prices and sectoral stock returns in Jordan around the Arab uprisings of 2010

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  • Bouri, Elie
  • Awartani, Basel
  • Maghyereh, Aktham

Abstract

In this paper, we test for mean and variance causality between world oil prices and sectoral equity returns in Jordan before and after the Arab Uprisings that started in 2010. The testing methodology is based on the sample of cross-correlation functions that are computed from the standardized residuals of a GARCH process. Our results show that the influence is not uniform across the equity sectors. The oil return shocks significantly impact the Financials and the Services sectors, while its effect is insignificant on the Industrials sector. This result is more pronounced in the period that follows the Arab Uprisings. In terms of risk transfer, we find that oil is a negligible risk factor. However, there is still a significant evidence of risk transmission to the Industrials sector particularly during the Arab Uprisings period. These results represent a unique information transmission mechanism that is useful for risk management and portfolio diversification.

Suggested Citation

  • Bouri, Elie & Awartani, Basel & Maghyereh, Aktham, 2016. "Crude oil prices and sectoral stock returns in Jordan around the Arab uprisings of 2010," Energy Economics, Elsevier, vol. 56(C), pages 205-214.
  • Handle: RePEc:eee:eneeco:v:56:y:2016:i:c:p:205-214
    DOI: 10.1016/j.eneco.2016.03.021
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    More about this item

    Keywords

    Causality; Mean; Variance; Oil prices; Stock market sector; Political risk; Jordan; Arab uprisings;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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