Abstract
In this study, by considering the period between January 2010 and December 2019 of BRICS-T countries, the relationship between oil prices and stock prices was examined through the Hatemi-J asymmetric causality test (2012). The stationarity levels of the series were determined by Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests. Hatemi-J (2012) asymmetric causality test, which takes into account the presence of asymmetric information in financial markets by distinguishing positive and negative shocks, was used. Accordingly, hidden relationships that could not be detected using the symmetric causality test were revealed with the help of the asymmetric causality test. Keywords: BRICS-T, oil prices, stock prices, asymmetric causality JEL Classifications: C23, G15, Q40. DOI: https://doi.org/10.32479/ijeep.10487
Highlights
Oil prices, which directly or indirectly affect many sectors in the economy, are an important indicator of economic performance
The regression analysis results showed that the oil price and exchange rate and their changes have a positive and significant effect on Canadian stock returns Oil price shocks in oil exporting countries have a non‐linear relationship with stock returns
Mexico is the only country where stock market returns are not affected by oil market shocks Rising oil prices raise oil producers ‘stock prices, while lowering oil consumers’ stock prices While oil‐importing countries’ stock markets reacted negatively to the increases in oil prices, the opposite is true for oil‐exporting exchanges
Summary
Oil prices, which directly or indirectly affect many sectors in the economy, are an important indicator of economic performance. It is possible to see the chain interaction of increases in crude oil prices on macroeconomic variables such as inflation, unemployment and economic growth (Hamilton, 1983). Oil prices can indirectly affect macroeconomic indicators and stock market returns primarily by affecting industrial production and inflation. Oil prices can negatively affect the overall performance of the stock market, both directly and indirectly. A direct negative effect can be explained by the upward movement in oil prices creating uncertainty in financial markets, which in turn leads to a fall in share prices. As a result of the increase in oil prices, the decrease in stock prices due to low production level and higher inflation rates is an indirect negative effect (Filis, 2010)
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