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Return and volatility linkages between oil prices and the Lebanese stock market in crisis periods

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  • Bouri, Elie

Abstract

This paper examines the return and volatility linkages between oil prices and the Lebanese stock market by applying the newly developed VAR-GARCH (Vector Autoregressive-Generalized Autoregressive Conditional Heteroskedasticity) model to weekly data from 30 January 1998 to 30 May 2014. To better understand the impact of the global financial crisis, we divide the data into three sub-periods: the pre-crisis period (02 February 1998–28 December 2007), the crisis period (02 January 2008–30 June 2009), and the post-crisis period (01 July 2009–30 May 2014). Contrary to previous studies showing the two-way transmission of return and volatility from oil prices to the stock markets of oil-exporting countries, our empirical results for the whole period reveal weak unidirectional return and volatility transmissions from oil prices to the Lebanese stock market. While the interrelationship between oil prices and Lebanese stocks increased during the crisis, it eased significantly in the post-crisis period. Our empirical results are important for policymakers involved in shock prevention and for portfolio managers seeking optimal portfolio allocation.

Suggested Citation

  • Bouri, Elie, 2015. "Return and volatility linkages between oil prices and the Lebanese stock market in crisis periods," Energy, Elsevier, vol. 89(C), pages 365-371.
  • Handle: RePEc:eee:energy:v:89:y:2015:i:c:p:365-371
    DOI: 10.1016/j.energy.2015.05.121
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    2. Singhal, Shelly & Ghosh, Sajal, 2016. "Returns and volatility linkages between international crude oil price, metal and other stock indices in India: Evidence from VAR-DCC-GARCH models," Resources Policy, Elsevier, vol. 50(C), pages 276-288.
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    7. 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.
    8. Huang, Shupei & An, Haizhong & Gao, Xiangyun & Hao, Xiaoqing, 2016. "Unveiling heterogeneities of relations between the entire oil–stock interaction and its components across time scales," Energy Economics, Elsevier, vol. 59(C), pages 70-80.
    9. Jiang, Meihui & An, Haizhong & Jia, Xiaoliang & Sun, Xiaoqi, 2017. "The influence of global benchmark oil prices on the regional oil spot market in multi-period evolution," Energy, Elsevier, vol. 118(C), pages 742-752.
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    14. Maghyereh, Aktham I. & Awartani, Basel & Bouri, Elie, 2016. "The directional volatility connectedness between crude oil and equity markets: New evidence from implied volatility indexes," Energy Economics, Elsevier, vol. 57(C), pages 78-93.
    15. Dutta, Anupam & Nikkinen, Jussi & Rothovius, Timo, 2017. "Impact of oil price uncertainty on Middle East and African stock markets," Energy, Elsevier, vol. 123(C), pages 189-197.
    16. Bouri, Elie, 2015. "Oil volatility shocks and the stock markets of oil-importing MENA economies: A tale from the financial crisis," Energy Economics, Elsevier, vol. 51(C), pages 590-598.
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    18. Huang, Shupei & An, Haizhong & Gao, Xiangyun & Wen, Shaobo & Hao, Xiaoqing, 2017. "The multiscale impact of exchange rates on the oil-stock nexus: Evidence from China and Russia," Applied Energy, Elsevier, vol. 194(C), pages 667-678.

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    Keywords

    Return; Volatility; Oil prices; Stock market; Lebanon; GARCH;

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