Impact of oil volatility shocks on global emerging market stock returns

Probal Dutta, Md Hasib Noor and Anupam Dutta

International Journal of Managerial Finance, 2017, vol. 13, issue 5, 578-591

Abstract: Purpose - The purpose of this paper is to investigate whether the crude oil volatility index (OVX) plays any key role in explaining the trend in emerging market stock returns from a global standpoint. Design/methodology/approach - At the empirical stage, different forms of the GARCH-jump model have been estimated. Findings - The findings confirm the effects of OVX on equity returns. In addition, the results document that there exist time-varying jumps in the stock market returns. Besides, the impacts of OVX shocks appear to be symmetric. The analysis further shows that the magnitude of OVX impact is marginally bigger than that of the conventional oil price shocks. Originality/value - Since various financial assets are traded on the basis of oil and equity markets, investors, for instance, could use the findings of this study for taking proper investment decisions and gaining better portfolio diversification benefits. Additionally, policymakers could utilize the results to develop effective measures and strategies in order to minimize the oil price risk.

Keywords: GARCH-jump model; Global emerging stock index; Oil volatility shocks; OVX; G1 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-03-2017-0039

DOI: 10.1108/IJMF-03-2017-0039

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