Oil shocks and stock market volatility of the BRICS: A GARCH-MIDAS approach

Afees Salisu and Rangan Gupta

Global Finance Journal, 2021, vol. 48, issue C

Abstract: In this study, we employ the GARCH–MIDAS (Generalised Autoregressive Conditional Heteroskedasticity variant of Mixed Data Sampling) model to investigate the response of stock market volatility of the BRICS group of countries (Brazil, Russia, India, China, and South Africa) to oil shocks. We utilise the recent datasets of Baumeister & Hamilton (2019), where oil shocks are decomposed into four variants: oil supply shocks, economic activity shocks, oil consumption shocks, and oil inventory shocks. We further decompose each of these shocks into positive and negative shocks, and our findings show heterogeneous response of stock market volatility of the BRICS countries to the alternative oil shocks, including positive and negative shocks. The differing responses across the BRICS countries could be attributed to differences in the economic size, oil production, and consumption profile of the countries, market share distribution across firms, and financial system and regulation efficiency.

Keywords: Oil shocks; Stock market volatility; BRICS; GARCH–MIDAS (search for similar items in EconPapers)
JEL-codes: C32 G12 G15 Q02 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

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Working Paper: Oil Shocks and Stock Market Volatility of the BRICS: A GARCH-MIDAS Approach (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:48:y:2021:i:c:s1044028319303503

DOI: 10.1016/j.gfj.2020.100546

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