Quantile relationship between oil and stock returns: Evidence from emerging and frontier stock markets
Riza Demirer and
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Shawkat Hammoudeh: Montpellier Business School, Montpellier, France
No 15-48, Working Papers from Eastern Mediterranean University, Department of Economics
This study extends the literature on the asymmetric effect of oil price fluctuations on emerging and frontier stock markets via a quantile-on-quantile approach that allows to capture normal and extreme states in each respective market. We find that oil risk exposures are heterogeneous across the emerging and frontier stock markets and indeed display quantile-specific characteristics. Observing uniform patterns of oil risk exposures within groups of countries that include both importers and exporters, we argue that oil price risk serves as a systematic risk proxy, capturing the market’s concerns regarding global growth expectations, rather than a simple import/export commodity. Our findings suggest that signals from the oil market, either via measures of trading activity in oil futures or changes in basis values, could be utilized by policy makers to improve models of stock market volatility.
Keywords: Stock returns; Oil prices; Quantile regression; Emerging markets (search for similar items in EconPapers)
JEL-codes: C22 G12 Q40 (search for similar items in EconPapers)
Pages: 31 pages
New Economics Papers: this item is included in nep-ene and nep-rmg
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http://repec.economics.emu.edu.tr/RePEc/emu/wpaper/15-48.pdf First version, 2019 (application/pdf)
Journal Article: Quantile relationship between oil and stock returns: Evidence from emerging and frontier stock markets (2019)
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