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Does oil price uncertainty transmit to the Thai stock market?

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  • Jiranyakul, Komain

Abstract

This study investigates the impact of oil price volatility (uncertainty) on the Stock Exchange of Thailand. Monthly data from May 1987 to December 2013 are applied to the two-stage procedure. In the first step, a bivariate generalized autoregressive conditional heteroskedastic (GARCH) model is estimated to obtain the volatility series of stock market index and oil price. In the second step, the pairwise Granger causality tests are performed to determine the direction of volatility transmission between oil to stock markets. It is found that movement in real oil price does not adversely affect real stock market return, but stock price volatility does affect real stock return. In addition, there exists a positive one-directional volatility transmission running from oil to stock market. It is also found that oil price movement and its uncertainty adversely affect two main sub-index returns. These important findings give some implications for risk management and policy measures.

Suggested Citation

  • Jiranyakul, Komain, 2014. "Does oil price uncertainty transmit to the Thai stock market?," MPRA Paper 57395, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:57395
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    Cited by:

    1. Mehmet Balcilar & Rangan Gupta & Christian Pierdzioch, 2022. "Oil-Price Uncertainty and International Stock Returns: Dissecting Quantile-Based Predictability and Spillover Effects Using More than a Century of Data," Energies, MDPI, vol. 15(22), pages 1-26, November.
    2. Goodness C. Aye, 2014. "Does Oil Price Uncertainty Matter for Stock Returns in South Africa?," Working Papers 201484, University of Pretoria, Department of Economics.
    3. Afees A. Salisu & Rangan Gupta & Riza Demirer, 2022. "Oil Price Uncertainty Shocks and Global Equity Markets: Evidence from a GVAR Model," JRFM, MDPI, vol. 15(8), pages 1-26, August.
    4. Afees A. Salisu & Rangan Gupta & Riza Demirer, 2021. "The Effect of Oil Price Uncertainty Shock on International Equity Markets: Evidence from a GVAR Model," Working Papers 202160, University of Pretoria, Department of Economics.
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    6. Alsalman, Zeina, 2016. "Oil price uncertainty and the U.S. stock market analysis based on a GARCH-in-mean VAR model," Energy Economics, Elsevier, vol. 59(C), pages 251-260.

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    More about this item

    Keywords

    Real stock price; real oil price; volatility transmission; emerging markets;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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