Does oil price variability affect the long memory and weak form efficiency of stock markets in top oil producers and oil Consumers? Evidence from an asymmetric MF-DFA approach

Walid Mensi, Yun-Jung Lee, Xuan Vinh Vo and Seong-Min Yoon

The North American Journal of Economics and Finance, 2021, vol. 57, issue C

Abstract: This study examines the asymmetric multifractality and the market efficiency of the stock markets in the countries that are the top crude oil producers (USA, KSA, Canada and Russia) and consumers (Brazil, China, India, and Japan) using an asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) method. The results show evidence of an asymmetric multifractal nature for all markets. Moreover, the multifractality is stronger in the upward movement of the market returns, except in China. The degree of efficiency of the stock markets is shown to be time-varying and experienced a decrease during the 2008 global financial crisis (GFC), but an upside trend occurred during the recent oil price crash followed a significant decline during COVID-19. The stock markets have an anti-persistent feature during GFC and COVID-19, whereas they exhibit a long-term persistent feature during oil price crash. More interestingly, the efficiency of the stock markets of crude oil producers is lower in general than that of oil consumers. Furthermore, the efficiency of the stock market is lower in the downward movement of the market returns than in the upward movement. Asymmetry and oil price uncertainty index are the key driver of the stock markets and can serve as predictor of the stock market dynamics of top oil producers and top oil consumers particularly during COVID-19 and oil price crash.

Keywords: Efficient market hypothesis; Top oil producer and oil consumer; Oil uncertainty index; Asymmetric MF-DFA analysis; Hurst exponent (search for similar items in EconPapers)
JEL-codes: C58 G14 G15 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:57:y:2021:i:c:s1062940821000747

DOI: 10.1016/j.najef.2021.101446

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