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Testing for Frequency Causality between Oil Price and BRICS Stock Markets: A Comparative Analysis

Author

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  • Selmi , Refk

    (Business School of Tunis)

  • Bouoiyour;, Jamal

    (University of Pau, Pau, France)

Abstract

This article explores the strength and extent of causal relationship between BRICS (Brazil, Russia, India, China and South Africa) stock returns and real oil price using frequency domain approach of Breitung and Candelon (2006). This technique offers an appropriate alternative tool by investigating the causality in frequency domain, while standard causality tests focus only on the time domain. Using 1998-2015 quarterly data, we show that the impact of oil price on stock returns is not uniform across the investigated countries. Even though the slowly (quickly) fluctuating components of oil price exert a significant influence on real stock returns in Brazil and Russia (India and South Africa), medium and long term hidden factors were found as potential contributors of Chinese share market. The oil dependence profile, the distribution of market share between companies, the financial system efficiency and the effectiveness of regulation in securities markets have been offered to explain the heterogeneous responses of BRICS equities.

Suggested Citation

  • Selmi , Refk & Bouoiyour;, Jamal, 2016. "Testing for Frequency Causality between Oil Price and BRICS Stock Markets: A Comparative Analysis," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 31(3), pages 547-568.
    • Handle: RePEc:ris:integr:0693
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    Keywords

    Oil Price; Stock Returns; BRICS; Frequency Domain Causality;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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