Crude oil shocks and African stock markets

Precious Adaku Enwereuzoh, Jones Odei-Mensah () and Peterson Owusu Junior

Research in International Business and Finance, 2021, vol. 55, issue C

Abstract: In this paper, we investigate the impact of crude oil shocks on selected African stock markets using a Structural Vector Autoregressive model and a two-state regime smooth transition regression framework on monthly data from January 2000 to July 2018. The study is timely given the fast-growing energy sector and stock markets in Africa as well as the place of Africa in international trade. Selected markets are classified into oil-exporting (Nigeria, Tunisia, and Egypt) and oil-importing (Botswana, South Africa, Kenya, and Mauritius). The key findings are as follows: global demand shock does not really matter in oil-importing countries; there is little evidence that oil supply shock affects the real stock return for oil-exporting and oil-importing countries; oil-specific shock is significant for most countries investigated; negative price shocks have more impact than positive price shocks. The findings from this study have important implications for investors whose portfolios may comprise of assets from African stock markets and crude oil. Given the importance of oil in the global market, one would typically avoid equities that suffer from its shock. This study provides the indicators to inform that decision.

Keywords: Smooth transition regression; Oil-exporting countries; Oil-importing countries; Oil-market shocks; African stock returns (search for similar items in EconPapers)
JEL-codes: E44 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 (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:55:y:2021:i:c:s0275531920309545

DOI: 10.1016/j.ribaf.2020.101346

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