Directional predictability from energy markets to exchange rates and stock markets in the emerging market countries ( E7 + 1): New evidence from cross‐quantilogram approach

Aviral Tiwari, Muhammad Shahbaz, Rabeh Khalfaoui (), Rizwan Ahmed and Shawkat Hammoudeh
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Rabeh Khalfaoui: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine
Rizwan Ahmed: Kent Business School, University of Kent
Shawkat Hammoudeh: Drexel University

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Abstract: We examine the directional predictability of energy stock returns on exchange rates and stock market in the E7 + 1 emerging market economies, which include India, China, Indonesia, South Korea, Turkey, Brazil, Mexico, and Russia, over the period 4 January 2000 to 31 May 2018. To achieve this, we carried out a cross-quantile analysis in the static and dynamic frameworks, using the bi-variate cross-quantilogram (CQ) and the partial cross-quantilogram (PCQ) approaches and a dynamic variant of such approaches. The predictability of the stock returns on the energy prices for WTI, Brent, OPEC, heating oil and natural gas is examined. Further relationships are also conditioned by using two measures of geopolitical risk, including the general geopolitical risk (GPRD), and the geopolitical risk threats (GPRD_Threat). The overall results highlight the importance of employing the PCQ approach in examining the predictability of different pairs of the energy prices, exchange rates and stock markets. They also indicate that controlling for GPRD and GPRD_Threat significantly improves the predictability of these variables. Policy implications of the empirical findings have been elaborated and discussed.

Date: 2022-10-18
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Published in International Journal of Finance and Economics, 2022, 29 (1), pp.719-789. ⟨10.1002/ijfe.2706⟩

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Journal Article: Directional predictability from energy markets to exchange rates and stock markets in the emerging market countries (E7 + 1): New evidence from cross‐quantilogram approach (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03823420

DOI: 10.1002/ijfe.2706

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