Oil price asymmetric effects: answering the puzzle in international stock markets Articles uri icon

publication date

  • July 2013

start page

  • 136

end page

  • 145

volume

  • 38

international standard serial number (ISSN)

  • 0140-9883

electronic international standard serial number (EISSN)

  • 1873-6181

abstract

  • Although studies have found an asymmetric pattern in the response of aggregate output to oil price changes, parallel studies in stock markets have not been conclusive about their existence. This paper finds evidence that effects for oil-importing and oil-exporting countries run in opposite directions. Oil price hikes have a negative effect on the stock markets of oil-importing countries, while the impact is positive for the stock markets of oil-exporting countries. Statistical tests support the presence of asymmetric effects only in oil-importing countries. Oil price volatility has a negative impact in stock markets of oil-importing countries and positive in oil-exporting countries. Moreover, oil volatility seems to be affected asymmetrically by oil price changes. Oil price drops increase oil volatility more than oil price hikes do. Overall, the evidence seems to support that falls in oil prices do not impact stock markets because their positive effects are offset by negative effects of oil price volatility, canceling out effects for oil-importing countries.

keywords

  • asymmetric effects; international stock markets; oil prices; panel data; oil price volatility