Munich Personal RePEc Archive

Oil Price Shock and Effects on Stock Markets of Emerging Economies

Chatterjee, Susmita and Bagchi, Bhaskar and Dandapat, Dhruba Ranjan (2016): Oil Price Shock and Effects on Stock Markets of Emerging Economies.

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Abstract

The present study investigates the effect of sharp continuous falling crude oil prices on stock market indices of emerging economies like Brazil, Russia, India, China, South Africa and South Korea and also the relationship between crude oil prices and stock indices of these countries. The period of the study spans from July 2009 to January 2016. Multivariate cointegration techniques along with vector error correction mechanism, impulse response functions and multivariate CCC-GARCH model have been employed in the study. The long-run relationship has been empirically established between the variables only in Brazil and Russia, but, no such relationship has been found in case of other emerging economies. Except South Africa, stock indices of the other emerging economies adjust to changes in crude oil prices to correct short-run disequilibrium although, with varied speed of adjustment. CCC-GARCH estimation reveals the existence of volatility spillovers between crude oil prices and stock indices and convergence have been achieved for all the emerging economies.

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