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Asymmetric effects of oil price fluctuations in international stock markets

  • Veiga, Helena
  • Ramos, Sofía B.

New evidence on the way oil price fluctuations affect international stock markets is provided in analysis of the exposure of 43 stock markets. Oil price spikes depress international stock markets, but oil price drops do not necessarily increase stock market returns. Moreover, the volatility of oil prices has a negative impact on international stock market returns. Both these effects apply only to stock markets of developed countries. Emerging market returns are not sensitive to oil price variations. In addition, the asymmetry of oil price changes impacts oil volatility; i.e., when oil prices soar, oil volatility also increases, while negative oil price changes dampen volatility. Finally, oil price fluctuations are a factor in creating downside risk for international country investment.

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Paper provided by Universidad Carlos III de Madrid. Departamento de Estadística in its series DES - Working Papers. Statistics and Econometrics. WS with number ws100904.

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Date of creation: Feb 2010
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Handle: RePEc:cte:wsrepe:ws100904
Contact details of provider: Web page: http://portal.uc3m.es/portal/page/portal/dpto_estadistica

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