Publication: Asymmetric effects of oil price fluctuations in international stock markets
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2010-02
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Abstract
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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Keywords
Asymmetry, Multifactor asset pricing Models, Oil prices, Panel data, Quantile regression, Volatility