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Energy price shocks and stock market volatility in an energy-importing country

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  • Jaemin Son
  • Doojin Ryu

Abstract

We examine volatility dynamics in the Korean market using heterogeneous autoregressive models with exogenous covariates. The COVID-19 pandemic and the Russia–Ukraine War have caused substantial fluctuations in energy prices. We assess how these energy shocks affect stock market-implied volatility in Korea, a representative energy-importing country. During the pre-pandemic period, domestic and U.S. market factors affect Korea's volatility dynamics, whereas crude oil and natural gas futures prices have little explanatory power for these dynamics. In contrast, during the pandemic (war), oil (natural gas) futures prices become the key explanatory variable, and other market factors lose their explanatory power.

Suggested Citation

  • Jaemin Son & Doojin Ryu, 2025. "Energy price shocks and stock market volatility in an energy-importing country," Energy & Environment, , vol. 36(8), pages 3737-3769, December.
    • Handle: RePEc:sae:engenv:v:36:y:2025:i:8:p:3737-3769
    DOI: 10.1177/0958305X241228514
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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