scholarly journals Oil price effect on sectoral stock returns: A conditional covariance and correlation approach for Mexico

2020 ◽  
Vol 16 (1) ◽  
pp. 1-15
Author(s):  
Rodrigo A. Morales Fernández Rafaelly ◽  
Roberto J. Santillán-Salgado
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Spillover Effect ◽  
Oil Prices ◽  
Oil Price ◽  
Price Effect ◽  
Stock Market Performance ◽  
Original Contribution ◽  
Bivariate Garch Model ◽  
The Relationship

This paper analyzes the relationship between the volatility of oil price and selected sectoral stock returns in Mexico (industrials, materials, financials and consumer discretionary) by implementing a Diagonal VECH-type bivariate GARCH model in order to estimate conditional covariances and correlations. The econometric results suggest that there exists a statistically significant relationship between sector indices, as well as between Mexico’s aggregate stock exchange returns, and variations in oil prices. Conditional correlations suggest that during most of the analyzed period, the relationship between oil price fluctuations and sectoral stock returns is positive. The recommendation, supported by these results, is that investors should take into consideration the interaction between the analyzed variables in order to generate more robust risk-hedge strategies. An important limitation for this work is information availability at sector level in the country. The original contribution of this paper lies mainly in the analysis of the influence of oil prices over sectoral indices of the Mexican Stock Exchange. These results provide more support to the current that suggests that a price increase in oil has a direct spillover effect on stock market performance.

scholarly journals OIL PRICES MOVEMENTS AND INDUSTRY STOCK RETURNS: EVIDENCE FROM PAKISTAN STOCK EXCHANGE (PSX)

2021 ◽  
Vol 37 (01) ◽  
pp. 84-96
Author(s):  
Muhammad Asif ◽  
Sharif Ullah Jan ◽  
Shahid Iqbal
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Oil Prices ◽  
Oil Price ◽  
Price Movement ◽  
Future Studies ◽  
Listed Firms ◽  
Economic Recessions ◽  
The Impact ◽  
The Relationship

The recent financial and economic recessions have chiefly increased the importance of risk management and forecasting for business firms. Capital markets being the main pillar of economy are affected the most in such circumstances. The current study has attempted to investigate the impact of oil prices on the returns and volatility of Pakistani listed firms using the GARCH (1,1) model. Furthermore, this relationship has been investigated by categorizing the existing sectors of the Pakistan Stock Exchange (PSX) into oil producers, oil users, and oil substitutes for the period from January 2015 to December 2019. The findings of the study highlighted some strong evidence regarding the oil price movement and the firms’ returns across these sectors. Interestingly, firms’ returns behave differently about the magnitude of significance and direction of symbols based on their nature of the industry. Therefore, it is suggested for future studies to consider the nature of the sector of oil while exploring the relationship between oil prices and stock returns.

RETURN AND VOLATILITY SPILLOVER BETWEEN SECTORAL STOCK AND OIL PRICE: EVIDENCE FROM PAKISTAN STOCK EXCHANGE

2017 ◽  
Vol 12 (02) ◽  
pp. 1750007
Author(s):  
MUHAMMAD IRFAN MALIK ◽  
ABDUL RASHID
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Hedge Fund ◽  
Oil Prices ◽  
Optimal Portfolio ◽  
Oil Price ◽  
Price Transmission ◽  
Volatility Spillover ◽  
Hedge Ratios ◽  
Short Run

This paper aims to investigate the return and volatility spillover between world oil prices and the sectoral stock of Pakistan. We estimate a bivariate VAR(1)-AGARCH (1,1) model using weekly data sampled from January 1, 2001 to December 31, 2015. The model results are used to estimate the optimal portfolio weights and hedge ratios. The empirical findings suggest no short-run price transmission between world oil prices and stock sectors of Pakistan Stock Exchange. Only the past unexpected shocks in world oil prices has significant effect on the volatility of sectoral stock returns of Pakistan Stock Exchange, and no volatility spillover exist between world oil price and stock sectors. The optimal portfolio weights and hedge ratios for oil/stock holdings are sensitive to sectors considered. These findings are of great interest for policy makers, hedge fund managers, [Formula: see text] investors and market participants.

scholarly journals Has COVID-19 changed the stock return-oil price predictability pattern?

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Fan Zhang ◽  
Paresh Kumar Narayan ◽  
Neluka Devpura
Keyword(s):  
Financial Markets ◽  
Stock Returns ◽  
Empirical Model ◽  
Economic Activity ◽  
Stock Return ◽  
Oil Prices ◽  
Trading Strategies ◽  
Oil Price ◽  
Seasonal Effects ◽  
The Relationship

AbstractIn this paper, we examine if COVID-19 has impacted the relationship between oil prices and stock returns predictions using daily Japanese stock market data from 01/04/2020 to 03/17/2021. We make a novel contribution to the literature by testing whether the COVID-19 pandemic has changed this predictability relationship. Employing an empirical model that controls for seasonal effects, return-related control variables, heteroskedasticity, persistency, and endogeneity, we demonstrate that the influence of oil prices on stock returns declined by around 89.5% due to COVID-19. This implies that when COVID-19 reduced economic activity and destabilized financial markets, the influence of oil prices on stock returns declined. This finding could have implications for trading strategies that rely on oil prices.

scholarly journals Oil Price Shocks and Stock Market Performance: A comparison between Oil Exporting and Oil Importing Nations

2021 ◽  
Vol 15 (2) ◽  
pp. 118-134
Author(s):  
Muhammad Farhan ◽  
◽  
Syed Shahid Zaheer Zaidi
Keyword(s):  
Stock Market ◽  
Oil Prices ◽  
Oil Price ◽  
The Other ◽  
Independent Variables ◽  
Stock Market Performance ◽  
The World ◽  
The Impact ◽  
Bound Test ◽  
The Relationship

The paper explores the impact of shocks in oil prices on the stock market for the oil importing and exporting nations. As Pakistan is heavily dependent on imports of oil therefore, we focus on Pakistan as an oil importing nation and have taken Iran, as an oil exporting nation because, it is considered to be among top ten nations of the world that exports oil. Various studies in Pakistan have investigates the relationship between shocks in prices of oil and return on the stock but none of the study has examined the association between shocks in oil prices and return on the stock market by comparing Pakistan and Iran as an oil importer and exporter nations of the world. This study has employed Autoregressive Distributed Lag model to find out the relationship between dependent and independent variables. We have taken prices of oil as an independent variable, whereas, stock price has been taken as a dependent variable. On the other hand, rate of exchange and rate of interest are the other independent variables. The results of this study and bound test reveals a long run association between prices of oil and the stock return for both nations. It has been indicated in the results that high oil prices have an adverse impact on market of stock for an oil importing nation (i.e., Pakistan) and have positively impacted on Iran which is an oil exporter nation. The results confirm that oil price shock contributed towards positively affecting the market of stock of an oil exporter nation but negatively affected the stock market if an oil importing nation. The author recommended the investors of both nations to evaluate various alternatives to diversify portfolios of their stock market by utilizing other financial assets.

Do Financially Constrained Firms Earn Higher Returns than the Unconstrained Firms? A Comprehensive Evidence from Pakistan Stock Exchange

2020 ◽  
Keyword(s):  
Time Series ◽  
Asset Pricing ◽  
Capital Structure ◽  
Stock Returns ◽  
Financial Constraints ◽  
Stock Exchange ◽  
Cash Flows ◽  
Total Asset ◽  
Cash Holding ◽  
The Relationship

This paper examines the relationship between financial constraints and the stock returns explaining the pricing of stock through financially constrained and unconstrained firms in Pakistan. Three proxies; total assets, tangible to total assets and cash holding to total assets ratios) have been used for financial constraints and the study tried to investigate that either the investors are compensated for taking the extra risk or not in Pakistan Stock Exchange (PSX). We find that the financially constrained firms don’t earn higher returns when their capital structure is heavy with liquid assets and their cash flows are more than the unconstrained firms in PSX. Moreover, the time series results showed that the risk-adjusted returns of the most constrained firms give the mix and somewhat negative and significant and insignificant results for the Pakistani firms listed in PSX sorted based on tangible to total assets and Cash holding to total asset ratios. Keywords: Asset Pricing, Financial constraints, risk-adjusted performance of portfolios

Exploring the inflationary effect of oil price in the US

2019 ◽  
Vol 13 (1) ◽  
pp. 60-76 ◽  
Author(s):  
Amine Lahiani
Keyword(s):  
Growth Rate ◽  
Structural Breaks ◽  
Oil Prices ◽  
Oil Price ◽  
Inflation Expectations ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Content Type ◽  
The Us ◽  
The Relationship

PurposeThe purpose of this paper is to explore the effect of oil price shocks on the US Consumer Price Index over the monthly period from 1876:01 to 2014:04.Design/methodology/approachThe author uses the Bai and Perron (2003) structural break test to split the data sample into sub-periods delimited by the computed break dates. Afterwards, the author uses the quantile treatment effects over the full sample and then, by including sub-periods dummies to accommodate the selected structural breaks that drive the relationship between inflation and oil price growth.FindingsThe findings include a decreased transmission effect of oil price changes on inflation in recent years; a varied elasticity of inflation to the growth rate of oil prices across the distribution; and, finally, evidence of asymmetry in the relationship between the growth rate of oil prices and inflation, with a higher transmission mechanism for decreasing rather than increasing oil prices.Practical implicationsPolicymakers should remain alert to monitoring potential inflation increases and should take precautionary measures to anchor inflation expectations, because inflation reacts differently to positive and negative oil price shocks. Moreover, authorities should consider the asymmetric reaction of inflation to oil price shocks to adopt an appropriate monetary policy strategy to achieve the price stability target.Originality/valueThe paper used a quantile regression model with structural breaks, which has not yet been used in the literature.

scholarly journals PENGARUH PENERBITAN SUKUK TERHADAP REAKSI PASAR (SURVEY TERHADAP PERUSAHAAN-PERUSAHAAN YANG MENERBITKAN OBLIGASI SYARIAH YANG TERDAFTAR DIBURSA EFEK INDONESIA SELAMA TAHUN 2015)

2019 ◽  
Vol 4 (3) ◽  
pp. 496-503
Author(s):  
Mulya Iskandar ◽  
Ridwan Ridwan
Keyword(s):  
Stock Returns ◽  
Abnormal Return ◽  
Research Method ◽  
Quantitative Research ◽  
Stock Exchange ◽  
Secondary Data ◽  
Cumulative Abnormal Return ◽  
Market Reactions ◽  
Independent Variables ◽  
The Relationship

This study aims to determine how the influence of a sukuk instrument issuance on market reactions listed on the Indonesia Stock Exchange (IDX) during 2015. The research method used in this study is quantitative research. Quantitative research contains a relationship between cause and effect. The type of data used is secondary data, data collection used by the author is to know the relationship between two or more variables. The object to be examined in this study is the total value and rating of the issuance of Islamic bonds (sukuk) companies as independent variables and cumulative abnormal return shares of companies that issue Islamic bonds (sukuk) listed on the Indonesia Stock Exchange in 2015. The results of this study indicate the value of sukuk bond issuance and sukuk bond issuance ratings jointly affect stock returns. The value of issuing sukuk bonds partially affects stock returns and the rating of bond issuance has an effect on return.

scholarly journals Systematic illiquidity, characteristic illiquidity, and stock returns: Timeseries analysis

2022 ◽  
Vol 9 (2) ◽  
pp. 72-80
Author(s):  
Soltane et al. ◽  
Keyword(s):  
Emerging Markets ◽  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Timeseries Analysis ◽  
The Relationship

The objective of this research is to investigate the relationship between illiquidity and stock prices on the Tunisian stock exchange. While previous researches tended to focus on one form of illiquidity to examine this relationship, our study unifies three forms of illiquidity at the same time. Indeed, we simultaneously consider illiquidity as systematic risk, as a characteristic of the market, and as a characteristic of the stock. The aggregate illiquidity of the market is the average of individual stock illiquidity. The illiquidity risk is the sensitivity of the stock price to illiquidity shocks. Shocks of market illiquidity are estimated by the innovations in the expected market illiquidity. Results show that investors on the Tunisian stock exchange do not require higher returns when they expect a rise of market illiquidity, whereas investors on U.S markets are compensated for higher expected market illiquidity. In addition, shocks of market illiquidity provoke a fall in stock prices of small caps, while large caps are not sensitive to market illiquidity shocks. This differs slightly from results based on U.S. data where illiquidity shocks reduce all stock prices but most notably those of small caps. Robustness tests validate our findings. Our results are consistent with previous studies which reported that the “zero-return” ratio predicts significantly the return-illiquidity relationship on emerging markets.

A new look at the meeting clustering effect

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ángel Pardo ◽  
Eddie Santandreu
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Relevant Information ◽  
Investor Attention ◽  
Content Type ◽  
Potential Link ◽  
Clustering Effect ◽  
Trading Volumes ◽  
The Relationship

PurposeThe study aims to test the existence of a meeting clustering effect in the Spanish Stock Exchange (SSE).Design/methodology/approachThis paper studies the relationship between the clustering of annual general meetings and stock returns in the SSE. A multivariate analysis is carried out in order to analyse the relationship between monthly returns and the clustering of general meetings in the SSE.FindingsThe authors show that meeting clustering exists and that some months exhibit significant and positive additional returns related to the holding of ordinary or extraordinary general meetings.Research limitations/implicationsThe authors have explored some possible explanations for the meeting clustering effect, such as a potential link with the “Halloween” effect or the presence of higher-than-normal levels of volatility, trading volumes or investor attention. However, none of these can explain the meeting clustering effect that emerges as a new anomaly in the SSE.Practical implicationsThe authors have documented significant and positive abnormal returns in some months that coincide with the holding of general meetings. Therefore, the holding of ordinary and/or extraordinary meetings in some months involves the release of relevant information for investors.Originality/valueThis study complements the financial literature because it is focused on the clustering of meetings and its effect on a stock market whose legal order is based on civil law. This fact allows us to shed new light on meeting clustering and its effect on other types of markets.

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