Oil price shocks and stock market volatility: evidence from European data

Stavros Degiannakis, George Filis and Renatas Kizys
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Renatas Kizys: University of Portsmouth

No 161, Working Papers from Bank of Greece

Abstract: The paper investigates the effects of oil price shocks on stock market volatility in Europe by focusing on three measures of volatility, i.e. the conditional, the realised and the implied volatility. The findings suggest that supply-side shocks and oil specific demand shocks do not affect volatility, whereas, oil price changes due to aggregate demand shocks lead to a reduction in stock market volatility. More specifically, aggregate demand oil price shocks have significant explanatory power on both current- and forward-looking volatilities. The results are qualitatively similar for aggregate stock market volatility and industrial sectors’ volatilities. Finally, a robustness exercise using short- and long-run volatility models supports the findings.

Keywords: Conditional Volatility; Realised Volatility; Implied Volatility; Oil Price Shocks; SVAR (search for similar items in EconPapers)
JEL-codes: C13 C32 G10 G15 Q40 (search for similar items in EconPapers)
Pages: 43
Date: 2013-09
New Economics Papers: this item is included in nep-ene and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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