Oil Shocks and Stock Market Volatility of the BRICS: A GARCH-MIDAS Approach

Afees Salisu and Rangan Gupta

No 201976, Working Papers from University of Pretoria, Department of Economics

Abstract: In this study, we employ the GARCH-MIDAS model to investigate the response of stock market volatility of the BRICS to oil shocks. We utilize 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 decomposed 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 the positive and negative shocks. The differing responses across the BRICS countries could be attributed to the difference in the economic size, oil production and consumption profile, market share distribution across firms, as well as 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)
Pages: 20 pages
Date: 2019-10
New Economics Papers: this item is included in nep-cis, nep-ene, nep-ets, nep-ore and nep-sea
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Journal Article: Oil shocks and stock market volatility of the BRICS: A GARCH-MIDAS approach (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201976

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