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How do oil supply and demand shocks affect Asian stock markets?

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  • Wee Chian Koh

Abstract

This paper examines how oil market shocks affect Asian stock prices using the structural vector autoregression (VAR) approach. Global oil supply and demand shocks are disentangled using sign restrictions and elasticity bounds. Oil price increases are bad news only if the source is from oil-market-specific demand shifts. Northeast Asian stock markets are more resilient as investors’ expectation of continued economic growth outweighs the adverse effect of higher oil prices. Increased global economic activity also stimulates stock prices. Global oil shocks are more important in explaining variability in Asian stock returns compared with the United States, suggesting different dynamics in Asia.

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  • Wee Chian Koh, 2017. "How do oil supply and demand shocks affect Asian stock markets?," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 10(1), pages 1-18, January.
    • Handle: RePEc:taf:macfem:v:10:y:2017:i:1:p:1-18
    DOI: 10.1080/17520843.2015.1135819
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    3. Aviral Kumar Tiwari & Samia Nasreen & Subhan Ullah & Muhammad Shahbaz, 2021. "Analysing spillover between returns and volatility series of oil across major stock markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2458-2490, April.
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