The impact of oil price fluctuations on stock markets in developed and emerging economies

Le, Thai-Ha and Chang, Youngho (2011): The impact of oil price fluctuations on stock markets in developed and emerging economies.

Abstract

This study examines the response of stock markets to oil price volatilities in Japan, Singapore, Korea and Malaysia by applying the generalized impulse response and variance decomposition analyses to the monthly data spanning 1986:01 – 2011:02. The results suggest that the reaction of stock markets to oil price shocks varies significantly across markets. Specifically, the stock market responds positively in Japan while negatively in Malaysia; the signal in Singapore and South Korea is unclear. We find that the stock market inefficiency, among others, appeared to have slowed the responses of the stock market to aggregate shocks such as oil price surges.

• Item Type: MPRA Paper
• Language: English
• Keywords: oil price fluctuation, stock return, exchange rate, emerging market, VAR model.
• Subjects: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; F - International Economics > F3 - International Finance; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

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