IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v18y2025i6p314-d1674211.html
   My bibliography  Save this article

Oil Prices, Sustainability Initiatives, and Stock Market Dynamics: Insights from the MSCI UAE Index

Author

Listed:
  • Hajer Zarrouk

    (Business Department, Higher Colleges of Technology, Abu Dhabi P.O. Box 41012, United Arab Emirates
    Laboratory of International Economic Integration, Department of Economics, Faculty of Economic Sciences and Management of Tunis, University of Tunis El Manar, Tunis 2092, Tunisia)

  • Mohamed Khalil Ouafi

    (Fintech, Risk and Investment Analysis, Business School, University of Sussex, Brighton BN1 9RH, UK)

Abstract

This study examines the interplay between oil price volatility, sustainability-driven initiatives, and the MSCI UAE Index, highlighting the challenges that oil-dependent economies face in balancing financial stability with sustainability transitions. Using a dataset of 2707 daily observations from 2014 to 2024, we applied linear regression, ARCH, GARCH, and TARCH models to analyze volatility dynamics across two key periods: the 2014–2016 oil price collapse and the 2019–2023 phase marked by the COVID-19 pandemic and increasing sustainability efforts. Our findings indicate that oil price fluctuations significantly impact the MSCI UAE Index, with GARCH models confirming persistent volatility and TARCH models revealing asymmetrical effects, where negative shocks intensify market fluctuations. While the initial sustainability policy announcements contributed to short-term volatility and investor uncertainty, they ultimately fostered market confidence and long-term stabilization. Unlike previous studies focusing solely on oil price volatility in emerging markets, this research integrates sustainability policy announcements into financial modeling, providing novel empirical insights into their impact on financial stability in oil-exporting economies. The findings suggest that stabilization funds, dynamic portfolio strategies, and transparent regulatory policies can mitigate oil price volatility risks and enhance market resilience during sustainability transitions, offering valuable insights for investors, policymakers, and financial institutions navigating the UAE’s evolving economic landscape.

Suggested Citation

  • Hajer Zarrouk & Mohamed Khalil Ouafi, 2025. "Oil Prices, Sustainability Initiatives, and Stock Market Dynamics: Insights from the MSCI UAE Index," JRFM, MDPI, vol. 18(6), pages 1-24, June.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:6:p:314-:d:1674211
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/18/6/314/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/18/6/314/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gillan, Stuart L. & Koch, Andrew & Starks, Laura T., 2021. "Firms and social responsibility: A review of ESG and CSR research in corporate finance," Journal of Corporate Finance, Elsevier, vol. 66(C).
    2. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    3. Knut Anton Mork & ystein Olsen & Hans Terje Mysen, 1994. "Macroeconomic Responses to Oil Price Increases and Decreases in Seven OECD Countries," The Energy Journal, , vol. 15(4), pages 19-35, October.
    4. Xiaoke Zhang & Xuankai Zhao & Yu He, 2022. "Does It Pay to Be Responsible? The Performance of ESG Investing in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(11), pages 3048-3075, September.
    5. Ågren, Martin, 2006. "Does Oil Price Uncertainty Transmit to Stock Markets?," Working Paper Series 2006:23, Uppsala University, Department of Economics.
    6. Knut Anton Mork & Oystein Olsen & Hans Terje Mysen, 1994. "Macroeconomic Responses to Oil Price Increases and Decreases in Seven OECD Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 19-36.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hilde C. Bjørnland & Håvard Hungnes, 2005. "The commodity currency puzzle," Discussion Papers 423, Statistics Norway, Research Department.
    2. Chang, Chia-Lin & McAleer, Michael & Tansuchat, Roengchai, 2013. "Conditional correlations and volatility spillovers between crude oil and stock index returns," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 116-138.
    3. Liu, Min & Guo, Tongji & Ping, Weiying & Luo, Liangqing, 2023. "Sustainability and stability: Will ESG investment reduce the return and volatility spillover effects across the Chinese financial market?," Energy Economics, Elsevier, vol. 121(C).
    4. Emrah I. Cevik & Sel Dibooglu & Max Gillman & Szilard Benk, 2025. "Granger predictability of real oil prices by us money and inflation in Markov-switching regimes," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 15(1), pages 29-52, March.
    5. Patricia Renou-Maissant, 2019. "Is Oil Price Still Driving Inflation?," Post-Print hal-05021637, HAL.
    6. Maghyereh, Aktham I. & Awartani, Basel & Tziogkidis, Panagiotis, 2017. "Volatility spillovers and cross-hedging between gold, oil and equities: Evidence from the Gulf Cooperation Council countries," Energy Economics, Elsevier, vol. 68(C), pages 440-453.
    7. Alao, Rasheed O. & Payaslioglu, Cem, 2021. "Oil price uncertainty and industrial production in oil-exporting countries," Resources Policy, Elsevier, vol. 70(C).
    8. Afees A. Salisu & Kazeem Isah, 2017. "Modeling the spillovers between stock market and money market in Nigeria," Working Papers 023, Centre for Econometric and Allied Research, University of Ibadan.
    9. Augustine Adebayo Kutu & Abieyuwa Ohonba, 2024. "The Impact of Crude Oil Price Fluctuation on Revenue Generation in the Oil Dependent Economy: Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 14(5), pages 181-190, September.
    10. Roy, Rudra Prosad & Sinha Roy, Saikat, 2017. "Financial contagion and volatility spillover: An exploration into Indian commodity derivative market," Economic Modelling, Elsevier, vol. 67(C), pages 368-380.
    11. Wang, Ren & Bian, Yuxiang & Xiong, Xiong, 2024. "Impact of ESG preferences on investments and emissions in a DSGE framework," Economic Modelling, Elsevier, vol. 135(C).
    12. Ramona DUMITRIU & Razvan STEFANESCU, 2018. "The decline of crude oil price influence on the RON/EUR exchange rate," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 34-42.
    13. Apostolakis, George N. & Giannellis, Nikolaos, 2024. "Asymmetric effects of monetary policy shocks on financial stability," The Journal of Economic Asymmetries, Elsevier, vol. 30(C).
    14. Lu, M. & Pollitt, M. G., 2025. "Will High Carbon Prices Reduce Fossil Fuel Use in China? Evidence from Price Elasticity Estimates using Firm Data," Cambridge Working Papers in Economics 2527, Faculty of Economics, University of Cambridge.
    15. Hilde Christiane Bjørnland & Håvard Hungnes, 2002. "Fundamental determinants of the long run real exchange rate: The case of Norway," Discussion Papers 326, Statistics Norway, Research Department.
    16. Rebeca Jiménez-Rodríguez, 2015. "Oil price shocks and stock markets: testing for non-linearity," Empirical Economics, Springer, vol. 48(3), pages 1079-1102, May.
    17. Ma, Yong & Li, Shuaibing & Zhou, Mingtao, 2024. "Forecasting crude oil prices: Does global financial uncertainty matter?," International Review of Economics & Finance, Elsevier, vol. 96(PC).
    18. Jiranyakul, Komain, 2025. "Asymmetric Effects of Oil Price Shocks on Economic Growth and Inflation in Asia: What do We Learn from Empirical Studies?," MPRA Paper 123664, University Library of Munich, Germany.
    19. Shan Wu & Ying Li, 2023. "A Study on the Impact of Digital Transformation on Corporate ESG Performance: The Mediating Role of Green Innovation," Sustainability, MDPI, vol. 15(8), pages 1-17, April.
    20. Khurram, Muhammad Usman & Chen, Lifeng & Abedin, Mohammad Zoynul & Adu, Douglas A. & Lucey, Brian, 2024. "ESG disclosure and internal pay gap: Empirical evidence from China," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 228-244.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:18:y:2025:i:6:p:314-:d:1674211. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.