Abstract
The impact of oil price changes on stock market index of the JSE, South Africa, was examined using NARDL model using 2008 -2017 monthly data of aggregated industrial indices. All-Share index was incorporated in the estimation equation to represent market factors. The results indicate that in the short-term, the indices responded asymmetrically to oil price changes whilst in the long-term they responded symmetrically. Oil & Gas, Industrials, Consumers services and Technology indices followed oil price change direction whereas Consumer goods and Financials indices opposed oil price change direction. Healthcare and Telecommunications responded in one direction irrespective oil price change direction.
Highlights
Extensive research has been conducted to understand the impact of oil price changes on macroeconomic factors (Batac & Tatlonghari, 2013; Hussin, Muhammad, Hussin, & Razak, 2012; Sahu & Mondal, 2015; Sedick, 2016; Wong & El Massah, 2017)
Research efforts to establish the impact of oil prices changes on stock market performance have yielded contradictory findings, e.g. for South African alone, one group of researchers found minimal impact of oil price changes on stock markets (Chinzara, 2011) yet another group reported a positive relationship between world oil price changes and stock prices (Chisadza, Dlamini, Gupta, & Modise, 2016)
Econometric models have been employed to study the impact of oil price changes on various economic variables
Summary
Extensive research has been conducted to understand the impact of oil price changes on macroeconomic factors (Batac & Tatlonghari, 2013; Hussin, Muhammad, Hussin, & Razak, 2012; Sahu & Mondal, 2015; Sedick, 2016; Wong & El Massah, 2017). Most of these were predominantly based on static techniques lacking the capability for simultaneous long-term and short-term relationship evaluation nor distinguishing between positive and negative changes. Oil importing countries like South Africa performance opposes the oil price change direction.
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