Stock price index analysis of four OPEC members: a Bayesian approach

International Journal of Energy Economics and Policy, 2020

The purpose of this study is to investigate the most significant determinants of financial development in OPEC countries during 2014-2016. To this end, this paper considered 34 explanatory variables including several economic and policy variables determining four different aspects of financial development as the degree of depth, efficiency, stability and quality of financial services. In order to obtain more reliable results and overcome the uncertainty problem in this study, we applied Bayesian Model Averaging (BMA) technique. The results indicated that better institutional indicators such as rule of law, government effectiveness, and corruption avoidance are associated with greater financial depth, efficiency, and stability. More importantly, the results revealed that the development in the oil sector could support financial development, and in particular contribute to greater depth and efficiency of the stock market. There are some important implications in this research for policymakers to promote financial development in OPEC countries.

Emerging Markets Review, 2004

Macroeconomics figures prominently in analyses of emerging markets, both as an asset class and for allocations within emerging markets. However, the literature on the drivers of emerging markets equity returns generally pays little attention to macroeconomic factors. This paper investigates the predictive power of several candidate macroeconomic factors for emerging market equity returns using the Bayesian model selection approach developed in Cremers [Cremers, K.J.M., 2002. Stock return predictability: a Bayesian model selection perspective. The Review of Financial Studies 15, 1223-1249]. The results provide strong evidence against all of the macro factors considered with the exception of exchange rate changes and, consistent with the existing literature, provide strong support for several financial factors, but not beta, as significant predictors of excess returns.

International Journal of Economics and Finance

This paper investigates the relationship between oil prices and stock market returns for the G7 and the BRIC countries for the period 1991-2016 using cointegration and a vector error correction model. Results reveal that there is no long-run relationship between oil prices and the stock market indices of the G7 countries. However, they also reveal that there is a long-run relationship between oil prices and the stock market indices of three out of the four BRIC countries (Brazil, China and Russia). This result appears to be broadly aligned with the idea that over the past quarter of a century emerging countries have been more exposed to oil prices (either as producers or consumers) than developed ones. Furthermore, from an investments’ and international portfolio management perspective, it seems that there might be benefits from diversification when holding the stock market index of a G7 country or India and oil assets since these appear to be segmented. On the other hand, such bene...

2021

This article analyzes the effect of oil prices on real stock returns in the MENA countries. We use a panel of stock indexes from nine MENA countries:

International Journal of Business, 2011

Past studies showed that stock market performance is likely to be affected by oil price movements in international markets since higher oil prices often raise fears and concerns about corporate earnings and economic growth. However, empirical results, especially for emerging markets, are not clear-cut on the possible impacts. This paper therefore aims to investigate whether short-and long-term relationships exist between oil prices and stock markets in GCC countries. On the basis of short-term analyses, strong positive links were found in Qatar, the UAE, and to some extent Saudi Arabia. More interestingly, our results indicate that when causality exists, it generally runs from oil prices to stock markets. Our long-term analysis shows that except for Bahrain, there is no long term link between oil and stock markets in GCC countries. For Bahrain, we find positive long-term relationships and, in particular, the stock markets took their cue from oil prices.

International Journal of Business and Management, 2013

The aim of this paper is to study the impact of oil price fluctuations on the stock markets and the interest rates from oil importing and oil exporting countries. To this end, Vector Autoregressive (VAR) models are estimated and pairwise Granger Causality tests are performed to the stationary series in order to analyse the short-term relationships among the variables. Also, the Johansen approach for multiple equations is carried out in order to test for cointegration among the series. Finally, the existence of cointegration set the estimation of Vector Error-Correction Models (VECMs) to investigate the long-term links between the financial variables and the oil prices. The major findings of this paper include: first, the interaction between the oil prices and the stock markets is much stronger than with the interest rates in the short and in the long-run. Second, the impact on oil importing countries is more significant than on oil exporting countries. Finally, it might be possible that the fluctuations in oil prices have different effects on developed and developing countries.

2018

This paper examines the response of real stock prices to oil price shocks for four selected emerging economies over the period from January 1991–March 2011. To overcome the problem of omitted information in small-scale vector autoregression (VAR) models, the factor augmented vector autoregressive (FAVAR) approach proposed by Bernanke et al (2005) is utilised. In addition, Stock and Watson (2002b) has been followed in order to extract two factors that are significantly related to a large set of world-level and country-specific macroeconomic variables. The extracted factors are then used as regressors in recursive VARs to assess the response of stock prices to oil price shocks. The key results suggest that the response of stock prices to oil price shocks is quite persistent and precise, but asymmetric across the four economies. Specifically, we observe that stock prices in Brazil and India respond negatively to oil price shocks, whereas the response in China is positive. We also obser...

Global Finance Journal, 2011

A number of recent studies have found a link between oil price changes and stock prices. However, these studies mostly concentrate on developed economies and analyze the impact of oil price shocks on stock returns at the aggregate stock market level. We assess the relation between changes in crude oil prices and equity returns in Gulf Cooperation Council (GCC) countries using country-level as well as industry-level stock return data. Our findings show that at the country level, except for Kuwait, stock markets have significant positive exposures to oil price shocks. At the industry level, the responses of industry-specific returns to oil shocks are significantly positive for only 12 out of 20 industries. Our study also provides evidence that oil price changes have asymmetric effects on stock market returns at the country level as well as at the industry level.

2016

In spite of developing alternative sources of energy, oil is still the most commonly uses energy source and it still plays an important role in global economic development. Today’s economies and industries depend on oil and its distillates. Oil prices fluctuations are hardly predictable and keep changing because they are affected by many different factors including the current supply of oil as set by OPEC, the demand for oil especially by emerging economies. Abstract Being primary exporters and suppliers of oil in the world, and being oil-dependent economies for decades, GCC countries are very likely to be affected by any changes or shocks in oil prices. The effect of oil price turbulences is obvious in stock markets in the long run. Since, there is a correlation between oil price and the stock markets in many oil-producing countries; this study tries to investigate this correlation in GCC countries as major oil producers and exporters. The study aims to evaluate the impact of oil p...

Emerging Markets Review, 2011