Do geopolitical oil price risk influence stock market returns and volatility of Pakistan: Evidence from novel non-parametric quantile causality approach

Nasir Khan, Asima Saleem and Oktay Ozkan

Resources Policy, 2023, vol. 81, issue C

Abstract: The influence of oil price disturbances and geopolitical risk on stock returns and volatility has been investigated by many scholars in different settings, though few of these have scrutinized this effect under distinct market trends. In this regard, this study investigates the causal upshot of geopolitical oil price threats on stock returns and volatility under distinct market trends in the Pakistan stock market. For this objective, the study utilizes a recently developed non-parametric quantile causality approach by exercising monthly data ranging between January 2004 and September 2022. The findings of the BDS and parameter stability tests expose that the series has nonlinear and unstable features, which leads to the novel model of non-parametric causality quantile. Likewise, the outcomes of the empirical analysis reveal that geopolitical oil price displacements have a causal influence on security returns only in normal market conditions, whereas it has a causal effect on volatility in all market conditions. This research makes policy suggestions for academics, businesses, and the Pakistani government based on its conclusions.

Keywords: Geopolitical oil price uncertainty; Return; Volatility; Non-parametric quantile causality; Pakistan (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:81:y:2023:i:c:s0301420723000636

DOI: 10.1016/j.resourpol.2023.103355

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