Exploring the sensitivity of BRICS stock markets to oil Price shocks: a quantile-on-quantile perspective

Lumengo Bonga-Bonga

MPRA Paper from University Library of Munich, Germany

Abstract: This paper evaluates the impact of varying magnitudes of oil price shocks on the equity market returns in BRICS countries under diverse market conditions using quantile-on-quantile regression analysis. Uniquely, unlike previous studies, this paper differentiates between demand and supply oil price shocks, under the assumption of a perfectly elastic oil supply. This assumption is grounded in a structural vector autoregressive (SVAR) framework, enhancing the analysis's precision in identifying the specific nature of oil price shocks. The empirical findings reveal that the impact of demand oil price shocks on the equity markets of BRICS nations varies according to the resource endowment of each country, showing distinct effects between countries with greater and lesser resource endowments. Additionally, the influence of supply oil price shocks on equity markets differs based on the market conditions, specifically whether the countries are net oil importers or exporters. These findings offer critical insights for policymakers and investors in BRICS countries, enabling the development of economic and business strategies that are closely aligned with the unique economic conditions and characteristics of each nation.

Keywords: oil price shocks; stock markets; BRICS; quantile-on-quantile (search for similar items in EconPapers)
JEL-codes: C31 C58 G15 (search for similar items in EconPapers)
Date: 2024-02-14
New Economics Papers: this item is included in nep-cis and nep-ene
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