Oil Price Shocks and Emerging Stock Markets: A Generalized VAR Approach

This study examines the dynamic linkages between crude oil price shocks and stock market returns in 22 emerging economies. The vector autoregression (VAR) analysis is carried on daily data for the period spanned from January 1, 1998 to April 31, 2004. This study utilized the generalized approach to forecast error variance decomposition and impulse response analysis in favor of the more traditional orthogonalized approach. Inconsistent with prior research on developed economies, the findings imply that oil shocks have no significant impact on stock index returns in emerging economies. The results also suggest that stock market returns in these economies do not rationally signal shocks in the crude oil market.Oil Prices, Emerging stock markets, VAR model.

The response of corporate investments in the US to oil price changes: the role of asymmetries

This paper investigates the influence of oil price changes on corporate investment in the US using a large sample of 15,411 companies from 1984 to 2017. It adds to the literature by showing an asymmetric response of capital investments to oil price changes for non-oil companies. Particularly, positive oil price changes have a larger adverse impact on investments than the positive impact created by negative oil price changes. These results are important in assessing the impact of energy price fluctuations on the long-term investment decisions of US companies

The co-movement between oil and clean energy stocks: A wavelet-based analysis of horizon associations

The production of clean energy is crucial for protecting the environment and satisfying the future demand for energy. However, the growth in clean energy production and consumption is influenced by the developments in the oil and the clean energy technology markets. Thus, it is crucial to study the association among these markets and this is the main objective of this research. Compared to the existing literature, we provide evidence from multiple time horizons. In particular, we combine wavelets over various time scales with multivariate GARCH (MGARCH) to find significant bidirectional return and risk transfer from oil and technology to the clean energy market. The transmissions are found to be more pronounced at longer time horizons. These results highlight the importance of certainty and stability in the oil and technology markets for the growth of clean energy particularly in the long term

Oil price changes and industrial output in the MENA region: nonlinearities and asymmetries

In this paper, we investigate the nature of asymmetry in the influence of oil price changes on output in six MENA countries. To get more observations for our analysis, we proxy GDP with industrial output and hence our inference is based on a relatively larger sample compared to previous studies. The results that we obtain are interesting and intuitive. First, we find that growth in MENA countries is linked to oil in the sense that it benefits from higher oil prices and it gets hurt by a fall in the oil market. Moreover, there are pronounced short- and long-term asymmetries in the influence of oil on output. In particular, the output is faster to respond to increases in the oil price than it responds to decreases. The long-term influence to a rise in oil is also higher, though it is realized over a longer period. These results are important and can be used to guide policies that are concerned with stabilizing the economies of the MENA region against oil price fluctuations

The effects of investor emotions sentiments on crude oil returns: A time and frequency dynamics analysis

In this paper, we use wavelet coherence analysis to find that sentiment has a significant effect on crude oil returns that lasts over various investment horizons. While oil returns are positively associated with the sentiments of optimism and trust, it is negatively linked to fear and anger. These relations are more pronounced over the medium and the long term. Additionally, we find that short-term oil returns are relatively more sentiment-sensitive during turbulent periods than in normal conditions. These results highlight the importance of sentiment and investor psychology in the crude oil market

The connectedness and hedging between gold and Islamic securities in the short, medium and long term

This paper investigates the dynamic connectedness between gold, sukuk and Islamic equities at multiple investment horizons, it also computes optimal hedge ratios and portfolio weights for these assets. Our findings suggest that gold hedges the risk of sukuk in the short and medium terms. We find also that gold plays an average but stable role in hedging and diversifying Islamic equities across all investment horizons. Moreover, we find that gold–Islamic assets portfolio provided a better risk diversification in the short term. These empirical findings are important as they highlight the role of gold in diversifying and managing the risks of portfolios that invest in Islamic assets

Time-varying transmission between oil and equities in the MENA region: New evidence from DCC-MIDAS analyses

In this paper we use the DCC-MIDAS (Dynamic Conditional Correlation-Mixed Data Sampling) model to infer the association between oil and equities in five MENA countries between February 2006 and April 2017. The model indicates that higher oil returns tends to reduce the long-term risk of the Saudi market, but to increase it in other markets. The risk transfer from oil to MENA equities is found to be weak. The dynamic conditional correlation between oil and equities is not always positive and it unexpectedly changes sign during the sample period. However, the association always strengthens when there is a large draw down in oil prices as well as during periods of high volatility. Finally, we find that short term association occasionally breaks from the longer-term correlation particularly in Egypt and Turkey. These patterns of influence and associations are unique, and have important implications for equity portfolio managers who are interested in investing in energy and MENA equities

OPEC meetings, oil market volatility and herding behaviour in the Saudi Arabia stock market

We investigate the influence of oil market volatility and hand‐picked OPEC meetings data on herding tendency in the Saudi equity market. Our results show the presence of significant herding behaviour in the Saudi market; surprisingly this herding behaviour is independent of oil market volatility. Importantly, we find herding on and around the OPEC meeting days however this is only limited to a period of high global uncertainty that is, during the Global Financial Crisis period (GFC) of 2008–2010. However, when we filter out factor‐based herding in the Saudi equities, we also find persistent herding in the post GFC period. These results are consistent when we assess the impact of OPEC meetings using event windows of one to 5 days before and after the announcement. In consideration of the crucial role of OPEC in determining the oil prices, we explain our results of Saudi market herding on and around OPEC meeting days for the prior announcement ambiguity and corrections before, on and after the announcements on global supply. Our results show that this tendency has originated during the GFC, has persisted in the post‐GFC in the Saudi equities and surprisingly, is largely found absent in the periods when the Saudi equity market witnessed bullish market conditions. Our results are robust after accounting for common factor return variations in equity returns, the unconditional and conditional estimates of the volatility in oil prices and several event windows around OPEC meeting days