Different strokes for different folks: The case of oil shocks and emerging equity markets

Raheem, Ibrahim D. (2022) Different strokes for different folks: The case of oil shocks and emerging equity markets. Energy Economics, 108. ISSN 0140-9883

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This study examines the relationship between oil shocks and stock returns. Taking a cue from Ready (2018), oil price is decomposed into demand, supply, and risk shocks. Building a dataset for emerging markets, we examine the extent to which oil shocks could accurately make in- and out-of-sample forecasts on stock returns. Three striking results emanate from our analyses. First, the three types of shock are significant determinants of stock returns in the selected countries. Second, the shocks are able to accurately make out-of-sample forecasts for all the countries across the forecasting horizon. Third, accounting for asymmetry in the shocks provided mixed results; essentially, we show that asymmetry and symmetry models provide opposing results. In all, the forecasting power of oil shocks is heterogeneous across countries, as the exact effect is dependent on: (i) the types of shock, (ii) countries and (iii) symmetry or asymmetry model. These results have important policy implications.

Item Type: Article
Uncontrolled Keywords: asymmetry,emerging markets,forecasting,oil shock,economics and econometrics,energy(all) ,/dk/atira/pure/subjectarea/asjc/2000/2002
Faculty \ School: Faculty of Social Sciences > School of Economics
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Depositing User: LivePure Connector
Date Deposited: 16 Feb 2022 09:30
Last Modified: 21 Apr 2023 01:24
URI: https://ueaeprints.uea.ac.uk/id/eprint/83512
DOI: 10.1016/j.eneco.2022.105897

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