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On the volatility transmission between oil and stock markets: a comparison of emerging importers and exporters

Author

Listed:
  • Elie Bouri

    (Holy Spirit University of Kaslik (USEK))

  • Riza Demirer

    (Sothern Illinois University Edwardswille)

Abstract

This paper examines the volatility transmissions between the oil and stock markets by performing causality-in-variance tests across a number of emerging (oil) importing and exporting nations. The volatility spillover causality tests generally rule out country-to-oil effects, suggesting unidirectional volatility transmissions from oil prices to emerging stock markets, particularly in the case of the net exporting nations of Kuwait, Saudi Arabia and UAE. We also observe significant volatility spillovers from oil prices to emerging importers during the post-global financial crisis period. The findings suggest that the information on oil market volatility combined with the magnitude of volatility spillovers can be utilized towards modeling and monitoring volatility shocks in emerging stock markets.

Suggested Citation

  • Elie Bouri & Riza Demirer, 2016. "On the volatility transmission between oil and stock markets: a comparison of emerging importers and exporters," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(1), pages 63-82, April.
    • Handle: RePEc:spr:epolit:v:33:y:2016:i:1:d:10.1007_s40888-016-0022-6
    DOI: 10.1007/s40888-016-0022-6
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    More about this item

    Keywords

    Oil price risk; Emerging markets; Volatility spillover; Causality tests;
    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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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