Dynamic causality interplay from COVID-19 pandemic to oil price, stock market, and economic policy uncertainty: evidence from oil-importing and oil-exporting countries.

COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach

In this paper, we analyze the connectedness between the recent spread of COVID-19, oil price volatility shock, the stock market, geopolitical risk and economic policy uncertainty in the US within a time-frequency framework. The coherence wavelet method and the wavelet-based Granger causality tests applied to US recent daily data unveil the unprecedented impact of COVID-19 and oil price shocks on the geopolitical risk levels, economic policy uncertainty and stock market volatility over the low frequency bands. The effect of the COVID-19 on the geopolitical risk substantially higher than on the US economic uncertainty. The COVID-19 risk is perceived differently over the short and the long-run and may be firstly viewed as an economic crisis. Our study offers several urgent prominent implications and endorsements for policymakers and asset managers

This paper presents a novel application of Data Envelopment Analysis (DEA) to analyze the impact of oil price changes on the efficiency of banks. Factors that affect the efficiency of banks have been of interest to researchers in various geographical regions. With a special focus on oil price changes, we investigate the determinants of bank efficiency in the Middle Eastern Oil-Exporting (MEOE) countries where macro-financial conditions are substantially affected by swings in oil prices. Our analysis consists of two stages: (i) measuring the efficiency scores of banks using the Semi-Oriented Radial Measure (SORM) DEA model, (ii) investigating the impact of alternative indicators of oil prices on the estimated efficiency scores after controlling for key bank-specific and country-specific variables. The analysis is based on an un-balanced panel data of banks operating in the Middle Eastern Oil-Exporting countries over the period of 2001–2011. Our findings reveal that oil price changes affect the efficiency of banks in the MEOE countries through both direct and indirect channels. In addition, we find that Islamic banks in the region are less responsive to oil price changes than commercial and investment banks.

This thesis consists of three empirical studies on what drives stock market dynamics. The first empirical study explores the effect of crude oil price changes on the stock market returns of oil-exporting countries and oil-importing countries as well as those of a number of global stock indices. Using the Ordinary Least Squares (OLS) approach as well as the more robust Quantile Regression (QR) approach to explore the relationship between crude oil and stock market dynamics. The empirical findings suggest that the QR approach provides further insights compared to the OLS approach. For instance, the QR approach is able to identify specific quantiles where a significant relation exists. In particular crude oil price increases tend to have a negative impact on the stock market returns for some oil-exporting countries (such as Mexico, Iraq, Ecuador, and Venezuela) and a positive effect for other oil-exporting countries (such as Brazil and Algeria). However, the OLS approach suggests that these relationships are insignificant at the level of the mean. Overall, the empirical findings confirm that the QR approach can reveal more information about the relationship between crude oil price changes and stock market return across different quantiles of their distribution.The second study explores the extent to which implied volatility extracted from commodity markets and developed stock markets can predict the implied volatility of stock markets in BRICS countries. Using daily data from 2011 to 2016 and employing the newly developed Bayesian Graphical Vector Autoregressive (BGVAR) model of Ahelegbey et al. (2016) which does not suffer from over-parameterization and the identification problems associated with traditional VAR frameworks, this study finds that implied volatilities extracted from global and regional stock markets have a significant predictive power over the implied volatilities in BRICS stock markets. However, the predictive power of implied volatility from commodity markets are significant only in the case of South Africa.The third empirical study analyses the relationship between illiquidity and stock market returns in the G7 and BRICS countries. More specifically, this study explore the extent to which the Amihud (2002) illiquidity measure can improve the explanatory power of three commonly used asset pricing models, namely the Capital Asset Pricing Model (CAPM), the Fama-French three-factor model and the Carhart four-factor model. The empirical analysis is based on 15 years of monthly data on the returns of seven stock portfolios: 100 largest companies (Largest100), small value (S/V), small neutral (S/N), small growth (S/G) stocks, big value (B/V) stocks, big neutral (B/N) stocks, and big growth (B/G) stocks. The findings suggest that incorporating illiquidity as an additional factor results in a significant improvement in the explanatory power of these asset pricing models across several of the sample countries (8 countries in the case of the CAPM and Carhart four-factor model, and 6 countries in the case of the Fama-French three-factor model). For example, in the US adding illiquidity to the CAPM leads to an increase of the goodness of fit by 2.6% in the B/V portfolio, and for the Fama-French three-factor model the goodness of fit increases by up to 3% in all portfolios Moreover, the goodness of fit increases in all portfolios in the US by adding illiquidity to the Carhart four-factor model, with an up to 36% increase in the B/N portfolio.

Qatar and other Middle Eastern countries stock market are influenced by oil prices. The goal of this paper is to compare how stock prices in the GCC are affected by shocks in oil prices and comparing the results with other stock markets in other oil exporting countries. The relationship between oil and stock prices has been analyzed extensively in the recent literature. This paper aims to shed light on the volatility spillover dynamics running from the oil market into stock markets volatility for eight selected Middle East/African frontier markets. Middle East countries account for 31? of all crude oil production, while approximately 69? of all crude oil is produced by only ten countries. The methodology adopted in this paper is based on the VAR-GARCH approach of Engle and Kroner (1995), which allows to test for the presence of volatility spillover in both directions (i.e., from oil prices to stock prices as well as in the opposite direction). We use weekly data for GCC stock markets, plus three frontier stock markets (Algeria, Morocco and Namibia), WTI oil prices and stock prices were sourced by the U.S. Energy Information Administration and Bloomberg, respectively. Weekly indices, Wednesday to Wednesday, were preferred in order to overcome the different stock markets days closure across the eight countries considered in this study. We define weekly returns as logarithmic differences of oil and stock prices. Following Caporale et al. (2006) and Al-Maadid et al. (2016), we use a multivariate GARCH-BEKK model to test for volatility spillover by placing restrictions on the relevant parameters. We consider the following two null hypotheses: i) Tests of no stock price volatility spillover to oil price volatility (H0: Stock → Oil: a21?g21?0) and ii) Tests of no oil price volatility spillover to stock price volatility (H0: Oil → Stock: a12?g12?0). The results indicate that there is volatility spillover from oil prices volatility into stock market returns volatility. There is evidence of significant conditional volatility spillover, measured by g12, running from oil towards UAE (0.130), Qatar (0.134) and Oman (0.259). These results are consistent with other findings which show significant volatility spillovers between oil and stock markets in the GCC region. However volatility spillover from stock market returns volatility into oil prices volatility.The conclusion of this paper helps with moving to a more diversified and knowledge based economy because it identifies the effects of oil prices volatility on stock markets volatility for eight oil exporter countries (GCC and non GCC counties). By using weekly data for the 2004–2015 period and using Wednesday to Wednesday weekly prices to overcome the different weekend effect, and by using the US stock market because it is a proxy for the business cycle and an international stock market, we model the relationship between oil and stock prices using a multivariate GARCH-BEKK model. We find evidence of co-movement between oil and stock markets, especially in the GCC region, whereas results for volatility spillovers are quite mixed. Consequently, general policies aimed at stabilizing stock prices in oil exporting countries should be formulated by diversification. The specific linkages between different markets need to be taken into account in order to devise appropriate policy measures.

This paper answers some questions regarding the nexus of food and fuel price commodities. This research can be used as a baseline to make policies to stabilize food commodities and renewable fuel standards. It also provide insightful evidence that policies which are used to increase the usage of green energy could possibly increase prices of food. This is an important establishment to account for when considering renewable fuel standards.Qatar and other Middle Eastern countries stock market are influenced by oil prices. The goal of this paper is to compare how stock prices in the GCC are affected by shocks in oil prices and comparing the results with other stock markets in other oil exporting countries. The relationship between oil and stock prices has been analysed extensively in the recent media to the recent oil shocks. However limited literature examines and compares how oil prices affect stock markets in the GCC. This paper sheds light on the volatility spillover dynamics running from the oil market into stock markets volatility for eight selected Middle East/African frontier markets. Middle East countries account for 31% of all crude oil production, while approximately 69% of all crude oil is produced by only ten countries. The methodology adopted in this paper is based on the VAR-GARCH approach of Engle and Kroner (1995), which allows to test for the presence of volatility spillover in both directions (i.e., from oil prices to stock prices as well as in the opposite direction). We use weekly data for GCC stock markets, plus three frontier stock markets in Africa, as well as the US S&P500 stock market. We define weekly returns as logarithmic differences of oil and stock prices. Following Caporale et al. (2006) and Al-Maadid et al. (2016), we use a multivariate GARCH-BEKK model to test for volatility spillover by placing restrictions on the relevant parameters. We consider the following two null hypotheses: i) Tests of no stock price volatility spillover to oil price volatility (H0: Stock → Oil: a21 = g21 = 0) and ii) Tests of no oil price volatility spillover to stock price volatility (H0: Oil → Stock: a12 = g12 = 0). The results indicate that there is volatility spillover from oil prices volatility into stock market returns volatility. There is evidence of significant conditional volatility spillover, measured by g12, running from oil towards UAE (0.130), Qatar (0.134) and Oman (0.259). These results are consistent with other findings which show significant volatility spillovers between oil and stock markets in the GCC region. However volatility spillover from stock market returns volatility into oil prices volatility is also apparent in some GCC counties.The conclusion of this paper helps with moving to a more diversified and knowledge based economy because it identifies the effects of oil prices volatility on stock markets volatility for eight oil exporter countries (GCC and non GCC counties). By using weekly data for the 2004–2015 period and using Wednesday to Wednesday weekly prices to overcome the different weekend effect, and by using the US stock market because it is a proxy for the business cycle, we model the relationship between oil and stock prices using a multivariate GARCH-BEKK model. We find evidence of co-movement between oil and stock markets, especially in the GCC region. Consequently, general policies aimed at stabilizing stock prices in oil exporting countries should be formulated by diversification the stock the reliance on the oil sector. However, the specific linkages between different markets need to be taken into account in order to devise appropriate policy measures.

In recent years, gold markets have attracted considerable attention from investors, because it is used as hedge to fight the increasing risk after the financial crisis of 2008. The exchange rate of the dollar/euro is interchangeably used in investment portfolios that include precious metals and oil. Furthermore, Crude oil is the one of the most important energy resources in the world and influences the economy and financial markets. In the first essay, we employ smooth transition autoregressive (STAR) model to investigate the nonlinear dynamic behavior of gold price, oil price, and the dollar/euro. The empirical results indicate that these variables exist in a nonlinear relationship. We consider the change rate of the dollar/euro as the threshold value that represents the dynamic LSTAR-type process, whereas the oil price as the threshold value represents the smooth symmetric ESTAR-type process. The results present the greater threshold effect that exists between the gold price and the change rate of the dollar/euro. In the second and third assay, we apply the PSTR model to analysis threshold effect of oil price changes and private consumption expenditures between oil-exporting and oil-importing countries. We use the oil price of one lag period as the threshold variable to explore the nonlinear relationship. The results indicate the value of threshold variable in the low and high regimes will cause consumer to decrease consumption expenditures in oil-exporting countries. When we consider the oil-importing countries, oil price changes will induce the consumption expenditure increase insensitively in the low and high regimes. On the contrary, the oil price changes will reduce the consumption expenditures in the middle regime.

This study investigates if the changes in economic policy uncertainty in the U.S. can explain the returns on stock markets of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The study also examines how the stock market returns of the six GCC countries respond to the changes in economic policy uncertainty in the U.S. The results demonstrate that changes in economic policy uncertainty in the U.S. are not significantly linked with the returns on all the stock markets except Oman stock market, which shows a statistical significant negative relationship with the changes in economic policy uncertainty in the U.S. Controlling for the effects of the U.S. stock market and oil price, returns on all the six GCC markets including Oman show insignificant coefficients. The returns on all the stock markets do not respond to the changes in economic policy uncertainty. The results of Granger causality tests show that the changes in economic policy uncertainty in the U.S. do not cause the returns of all the six GCC stock markets.

The impact that oil market shocks have on stock markets of oil-related economies has several implications for both domestic and foreign investors. Thus, we investigate the role of the oil market in deriving the dynamic linkage between stock markets of oil-exporting and oil-importing countries. We employed a DCC-FIGARCH model to assess the dynamic relationship between these markets over the period between 2000 and 2018. Our findings report the following regularities: First, the oil-stock markets’ relationship and that between oil-importing and oil-exporting countries’ stock markets themselves is time-varying. Moreover, we note that the response of stock market returns to oil price changes in oil-importing countries changes is more pronounced than for oil-exporting countries during periods of turmoil. Second, the oil-stock dynamic correlations tend to change as a result of the origin of oil prices shocks stemming from the period of global turmoil or changes in the global business cycle. Third, oil prices significantly drive the relationship between oil-importing and oil-exporting countries’ stock markets in both high and low oil-stock correlation regimes.

Do oil prices and stock markets move in tandem or in opposite directions? The complex and time varying relationship between oil prices and stock markets has caught the attention of the financial press, investors, policymakers, researchers, and the general public in recent years. In light of such attention, this paper reviews research on the oil price and stock market relationship. The majority of papers we survey study the impacts of oil markets on stock markets, whereas, little research in the reverse direction exists. Our review finds that the causal effects between oil and stock markets depend heavily on whether research is performed using aggregate stock market indices, sectorial indices, or firm-level data and whether stock markets operate in net oil-importing or net oil-exporting countries. Additionally, conclusions vary depending on whether studies use symmetric or asymmetric changes in the price of oil, or whether they focus on unexpected changes in oil prices. Finally, efind that most studies show oil price volatility transmits to stock market volatility, and that including measures of stock market performance improves forecasts of oil prices and oil price volatility. Several important avenues for further research are identified.

We contribute to the literature on the linkage among shocks in oil price and stock markets fluctuations in oil-exporting economies. We evaluate the effects of COVID-19 pandemic on the magnitude and persistence of responses of stock markets to oil price sudden changes both before and during the pandemic. We also identify the most important structural breaks in stock markets during the period 2013-2021. We find evidence that the majority of developing oil-exporting countries faced a major structural break in their stock markets in 2014 following the spectacular fall of oil price in that year. By contrast, their developed counterparts have been subject to structural break during the CIVID-19 pandemic. The outcomes of the generalize d impulse response analysis suggests that, shocks in oil price tend to hit oil exporters more severely throughout the COVID-19 pandemic than before the outbreak of the pandemic.

Purpose : This study examined the impact of economic policy uncertainty on the Indian stock market. Economic policy uncertainty showed that uncertainties persist in the economy and may affect economies, industries, and companies. The stock market of any economy is very volatile, and it can be easily affected by any small changes in the economy on a national and international level. We argued that EPU also significantly affected the Indian stock market. Design/Methodology/Approach : We analyzed the relationship of economic policy uncertainty with stock prices and market volatility using linear and logarithmic regression. Findings : Our study found that economic policy uncertainty had a positive correlation with market volatility and a significant negative relationship with returns on the Indian stock market. Further, EPU had negative impacts on the performance of firms. We also found that economic policy uncertainty did not have a similar impact on every sector. Sectors dealing with discretionary products and services like automobiles were more negatively impacted than sectors like fast-moving consumer goods and pharmaceuticals. Practical Implications : An investor must understand the impact of uncertainties on equity investments and different sectors to make sound decisions during such times. This information can be used both by firms and retail investors to act accordingly when the future trajectory of the economy is uncertain. Also, the authorities should try to reduce such risks as these can negatively impact the economic growth of a country. Originality/Value : This study contributes to the existing literature by examining the impact of economic policy uncertainty on the Indian stock market. Further, this study stated that economic policy uncertainty could be used as a predictive variable in addition to other macroeconomic variables in stock prediction models, making this study unique.

Natural resources commodity prices volatility and economic uncertainty: Evaluating the role of oil and gas rents in COVID-19

Oil prices and economic policy uncertainty: Evidence from global, oil importers, and exporters’ perspective

Business confidence matters for future growth as it relies on opinion surveys of developments in production activities, orders and stocks of finished products. Is it then affected by economic policy uncertainty and oil price asymmetries in the OECD countries? With limited evidence in the literature, we adopt the Augmented Mean Group (AMG) estimator following the evidence of cross-sectional dependence, non-stationarity and cointegration in the panel series. The full sample results show that business confidence is negatively affected by economic policy uncertainty and oil price. Moreover, the role of asymmetries cannot be neglected as both positive and negative oil price changes show different impacts on business confidence. The sub-sample results further reveal that the impacts of economic policy uncertainty and oil price on business confidence are higher in the Eurozone countries than in their non-Eurozone counterparts. We believe this is due to the central economic coordination and higher net-oil dependence and import status of the Eurozone countries.