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Economic significance of oil price changes on Russian and Chinese stock markets

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  • Michael Soucek
  • Neda Todorova

Abstract

This study discusses the economic significance of the relationship between oil price changes and emerging markets equity returns. It extends the literature by obtaining significant Granger causalities and impulse response functions for the daily returns over the last decade on the emerging markets of Russia and China. Furthermore, it is shown that a trading rule based on a bivariate Vector Autoregresive (VAR( p )) model outperforms the Russian and Chinese stock index in terms of risk and return, even when transaction costs are taken into account. Implementing the bootstrap methodology to test the results, it is proved that oil price fluctuations significantly contribute to the risk profile of the trading strategy for Russian market and improve the risk-return characteristics for Chinese stock trading.

Suggested Citation

  • Michael Soucek & Neda Todorova, 2013. "Economic significance of oil price changes on Russian and Chinese stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 23(7), pages 561-571, April.
  • Handle: RePEc:taf:apfiec:v:23:y:2013:i:7:p:561-571
    DOI: 10.1080/09603107.2012.732685
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    File URL: http://hdl.handle.net/10.1080/09603107.2012.732685
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    Citations

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    Cited by:

    1. Omura, Akihiro & Todorova, Neda & Li, Bin & Chung, Richard, 2016. "Steel scrap and equity market in Japan," Resources Policy, Elsevier, vol. 47(C), pages 115-124.
    2. Zhang, Jin & Xie, Mingjia, 2016. "China's oil product pricing mechanism: What role does it play in China's macroeconomy?," China Economic Review, Elsevier, vol. 38(C), pages 209-221.
    3. repec:eee:quaeco:v:67:y:2018:i:c:p:149-161 is not listed on IDEAS
    4. Souček, Michael & Todorova, Neda, 2013. "Realized volatility transmission between crude oil and equity futures markets: A multivariate HAR approach," Energy Economics, Elsevier, vol. 40(C), pages 586-597.
    5. Tokic, Damir, 2015. "The 2014 oil bust: Causes and consequences," Energy Policy, Elsevier, vol. 85(C), pages 162-169.
    6. repec:eee:ecmode:v:66:y:2017:i:c:p:258-271 is not listed on IDEAS
    7. Lubnau, Thorben, 2014. "Spread trading strategies in the crude oil futures market," Discussion Papers 353, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.

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