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The impact of oil price fluctuations on stock markets in developed and emerging economies

Author

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  • Thai-Ha Le

    (Division of Economics, Nanyang Technological University, Singapore)

  • Youngho Chang

    (Division of Economics, Nanyang Technological University, Singapore)

Abstract

This study examines the response of stock markets to oil price volatilities in Japan, Singapore, Korea and Malaysia by applying the generalized impulse response and variance decomposition analyses to the monthly data spanning 1986:01 – 2011:02. The results suggest that the reaction of stock markets to oil price shocks varies significantly across markets. Specifically, the stock market responds positively in Japan while negatively in Malaysia; the signal in Singapore and South Korea is unclear. We find that the stock market inefficiency, among others, appeared to have slowed the responses of the stock market to aggregate shocks such as oil price surges.

Suggested Citation

  • Thai-Ha Le & Youngho Chang, 2011. "The impact of oil price fluctuations on stock markets in developed and emerging economies," Working Papers 23, Development and Policies Research Center (DEPOCEN), Vietnam.
  • Handle: RePEc:dpc:wpaper:2311
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    Cited by:

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    2. Dhanya Alex & Roshna Varghese, 2015. "An Empirical Investigation into the Relationship of Crude Oil Price, Exchange Rate and BSE Sensex," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 4(3), pages 149-157, September.
    3. Ali, Mohsin & Masih, Mansur, 2014. "Does Indian Stock Market Provide Diversification Benefits Against Oil Price Shocks? A Sectoral Analysis," MPRA Paper 58828, University Library of Munich, Germany.
    4. Naurin, Abida & Qayyum, Abdul, 2016. "Impact of Oil Price and Its Volatility on CPI of Pakistan: Bivariate EGARCH Model," MPRA Paper 69774, University Library of Munich, Germany.
    5. GIRI A. K. & JOSHI Pooja, 2017. "The Impact Of Macroeconomic Indicators On Indian Stock Prices: An Empirical Analysis," Studies in Busine and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 12(1), pages 61-78, April.
    6. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2013. "Some thoughts on accurate characterization of stock market indexes trends in conditions of nonlinear capital flows during electronic trading at stock exchanges in global capital markets," MPRA Paper 49921, University Library of Munich, Germany.
    7. Naurin, Abida & Qayyum, Abdul, 2016. "Impact of Oil Price and Its Volatility on Stock Market Index in Pakistan: Bivariate EGARCH Model," MPRA Paper 70636, University Library of Munich, Germany.
    8. Nur Dilbaz Alacahan & Seda Yavuzaslan Soylemez, 2017. "The Impact of Petrol Prices on Stock Prices of Energy Companies: A Panel Data Analysis for Turkey," EconWorld Working Papers 17006, WERI-World Economic Research Institute, revised Oct 2017.
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    More about this item

    Keywords

    oil price fluctuation; stock return; exchange rate; emerging market; VAR model.;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • F3 - International Economics - - International Finance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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