Oil price changes and stock returns: Fresh evidence from oil exporting and oil importing countries

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Table

Paper Info	Purpose	Methodology	Results
(Filis et al., 2011)	The paper establishes the dynamic relationship between the stock returns of major oil importing and oil exporting countries with respect to the changes in oil prices.	Using the DCC-GARCH-GJR approach. It takes a total of 12 countries as 6 oil exporting and 6 oil importing countries.	The time varying correlations between oil exporting and oil importing countries are the same. The correlation increases positively/negatively from the aggregate demand side due to oil price shock and on aggregate supply side do not influence the relationship between the two groups of countries.
(Akoum et al., 2012)	The paper investigates the relationship between stock price movement and oil prices in the GCC region.	Empirical study using wavelet coherence to analyze the data.	The stock prices and oil prices are not dependent in the short run. They co-move in the long run. The dependencies increased after the financial crisis of 2008.
(Wang et al., 2013)	It finds out the relationship between oil price shock and stock market return, taking evidence from oil exporting and oil importing countries	It uses structural VAR analysis.	The net impact on a country depends on whether the country is a net importer or exporter of oil. The effect of aggregate demand uncertainty on stock markets is more in oil exporting countries as compared to oil importing countries.
(Guesmi & Fattoum, 2014)	It provides evidence of co-movement and volatility spillover of oil prices and stock market.	It is an empirical study using a multivariate GARCH model developed by Glosten. It is taking the sample of five major oil exporting countries as; Netherlands, France, Germany, Italy, and France and from four major oil importing countries as; UAE, Saudi Arabia, Kuwait and Venezuela.	There is no change in the relationship between the two groups of countries. Oil price has a positive correlation with stock prices. Oil price assets are not a safe haven for the investors to protect from the stock market shock.
(Sukcharoen et al., 2014)	The study examines the interdependence of oil and stock market indices between 1982 and 2007.	They used Copula GARCH to analyze the data between 1982 and 2007.	There is weak interdependence between the two groups of countries in terms of stock and oil indices.
(Bouri, 2015)	It provides empirical evidence on oil price shock and stock market volatility from the MENA countries.	It uses mixed methodology to include; ARMAX–GARCH for finding the conditional mean and variance of returns. On the other hand, it uses autocorrelation and day of the week effect and movement in international markets.	The stock market of Jordan is much more deceptive to the oil price movement than any other market in the MENA region. The oil price volatility is not a good indicator for stock price volatility in the Lebanese market.
(Maghyereh & Awartani, 2016)	The study investigates the relationship between oil price movement and equity return evidence from 10 countries in the MENA region.	The study uses GARCH and VAR model developed by the (Elder & Serletis, 2010) to study the impact of uncertainty	The oil uncertainty is important to determine the real return on equity shares. The negative correlation is found between all the oil exporting and importing countries in the sample.
(Wang & Liu, 2016)	The study investigates the dynamic spillover and correlation between crude oil and stock market.	The study uses GARCH class models to find out the relationship between crude oil and stock market. The study takes into consideration seven major oil exporting countries and nine major oil importing countries.	The crude prices can be hedged by investing in the stocks of oil exporting countries rather than in the stock of oil importing countries.
(Boldanov et al., 2016)	The paper investigates the time varying correlation between oil price shocks and stock market returns by taking data from oil exporting and oil importing countries.	It is an empirical study taking data between the period of January, 200 till December 2014. It uses the Diag BEKK model.	The correlation between stock market volatility fluctuates over time depending upon the major political and economic events like, early 2000 recession, 9/11 and global financial crisis of 2008.
(Antonakakis et al., 2017)	The study investigates the relationship between oil price shock and stock market returns by taking evidence from net oil exporting and net oil importing countries.	The study uses connectedness measures developed by the Diebold and Yilmaz and structural forecast error variance decomposition.	The implied volatility indices are highly correlated with the realized measures of volatility.
(Basher et al., 2018)	The study investigates the impact of price shock on stock returns in the major oil exporting countries.	It uses the non-linear relationship of oil market shock with the stock price movement in the multi-factor Markov switching framework.	The oil flow demand has a significant impact on stock return in Saudi Arabia, Kuwait, UAE, Canada, Norway and Russia. In Mexico, the oil price shock does not affect the stock market at all.
(Degiannakis et al., 2018)	The study evaluates the movement of stock market and oil prices and establishes the relationship between them.	Review of literature	The findings merely depend on the type of study undertaken by the researcher. Also, the conclusion depends whether the studies are symmetric or asymmetric.
(Bai & Koong, 2018)	The study examines the relationship between oil price changes, stock returns and exchange rates.	The study employed the diagonal BEKK model and dynamic impulse response functions.	The oil prices respond positively to the aggregate demand shocks. Oil shock negatively affects the US dollar index. The Chinese stock market is more volatile as compared to the US stock market.
(Singhal et al., 2019)	The study tries to find the linkages between Oil prices, stock prices, gold prices and exchange rate.	The study used ARDL bound co-integration tests.	Oil prices negatively influence the exchange rate in the long run. In the short run no interdependency is found.

Figure 1. Impulse response graphs for first time period for oil exporting countries.Source. Authors.

Figure 2. Impulse response graphs for second time period for oil exporting countries.Source. Authors.

Figure 3. Impulse response graphs for first time period for oil importing countries.Source. Authors.

Figure 4. Impulse response graphs for second time period for oil importing countries.Source. Authors.

Table A1. Average levels of stock price and crude oil

	First Period			Second Period
Name of the variable	mean	min	max	mean	min	max
Crude	63.4	45.3	74.6	39.8	19.33	52.26	214
Canada	16,486	14,213	17,944	15,732	11,228	17,653
China	2929	2464	3271	3149	2660	3452
France	5532	4611	6111	4893	3755	5612
Germany	12,294	10,417	13,789	12,142	8442	13,790
India	11,524	10,604	12,362	10,933	7610	13,982
Japan	21,936	19,562	24,084	22,576	16,553	27,568
Korea	2117	1910	2267	2234	1458	2873
Mexico	43,209	38,574	45,903	37,957	32,964	44,694
Norway	984	885	1054	902	687	1048
Russia	2747	2369	3220	2833	2113	3289
Saudi Arabia	8377	7349	9362	7639	5960	8760
Spain	9240	8376	10,084	7185	6107	8323
UK	7293	6463	7687	6032	4994	6603
US	2967	2448	3386	3212	2237	3735

Source. Authors’ computation.

Table A2. Descriptive statistics for oil exporting countries and crude oil

Name of the variable	min	median	mean	max	sd	skewness	kurtosis
crude	−9.918	0.108	−0.056	13.639	2.041	0.132	8.219
Saudi	−5.695	0.000	−0.014	3.833	0.983	−0.763	5.360
Russia	−4.588	0.047	0.045	2.395	0.826	−1.158	5.125
Mexico	−2.679	−0.030	−0.002	2.423	0.879	0.058	0.731
Norway	−4.888	0.026	−0.006	3.024	0.954	−1.063	4.760
Canada	−2.756	0.068	0.039	2.144	0.556	−1.039	4.617
Second Period
crude	−27.976	0.208	0.063	19.077	4.734	−1.491	11.804
Saudi	−16.755	0.000	0.075	6.831	1.761	−4.509	40.862
Russia	−8.646	0.132	0.089	7.435	1.676	−0.854	8.604
Mexico	−6.638	0.000	0.036	4.744	1.602	−0.531	2.168
Norway	−9.832	0.047	0.079	5.842	1.805	−1.533	7.702
Canada	−13.176	0.195	0.038	11.294	2.241	−1.365	13.520

Source. Authors’ computation.

Table A3. Descriptive statistics for stock index returns of oil importing countries

Name of the variable	min	median	mean	max	sd	skewness	kurtosis
France	−4.229	0.108	0.027	2.688	0.942	−1.268	3.848
Germany	−4.089	0.099	0.029	3.314	0.975	−0.904	2.959
Spain	−4.159	0.008	−0.006	2.485	0.899	−1.063	3.092
Korea	−3.952	0.027	0.000	2.837	0.895	−0.738	2.267
India	−3.780	0.000	0.002	5.182	0.883	0.568	5.194
Japan	−3.738	0.021	0.012	2.578	0.928	−0.448	1.921
China	−8.039	0.002	0.064	5.450	1.203	−1.132	9.470
US	−4.517	0.085	0.055	4.501	0.951	−0.566	5.758
UK	−3.689	0.048	−0.013	2.227	0.846	−1.100	3.610
Second Period
France	−13.098	0.028	0.040	8.056	2.157	−1.154	8.221
Germany	−13.055	0.000	0.081	10.414	2.179	−0.910	8.611
Spain	−15.151	0.039	−0.013	8.225	2.266	−1.362	10.626
Korea	−8.767	0.231	0.160	8.251	1.801	−0.291	5.812
India	−13.904	0.271	0.113	8.400	2.103	−1.806	11.974
Japan	−6.274	0.000	0.131	7.731	1.620	0.246	4.924
China	−4.603	0.000	0.055	5.554	1.162	−0.008	3.611
US	−12.765	0.255	0.106	8.968	2.252	−0.960	8.850
UK	−11.512	0.055	0.007	8.667	1.929	−1.050	8.053

Source. Authors’ computation.

Table A4. Results of panel unit root test

	Variable	test-stat	p.value
Panel A: Brent Crude Oil
Period 1	roil	−22.51	0.0000
Period 2	roil	−24.98	0.0000
Panel B: Oil Exporting Countries
Period 1	rstock	−24.34	0.0000
Period 2	rstock	−25.68	0.0000
Panel C: Oil Importing Countries
Period 1	rstock	−24.34	0.0000
Period 2	rstock	−25.68	0.0000

Source. Authors’ computation.

Table A5. Results of granger-causality

Oil Exporting countries
Causality	Stat	df	p.value
stock to oil	15.383	3	0.0020
oil to stock	8.024	3	0.0460
stock to oil	15.343	3	0.0020
oil to stock	18.274	3	0.0000
Oil Importing countries
Causality	Stat	df	p.value
stock to oil	33.415	3	0.0000
oil to stock	14.796	3	0.0020
stock to oil	22.554	3	0.0000
oil to stock	49.977	3	0.0000

Source. Authors’ computation.

Table A6. Forecast error variance decomposition

		First	Period	Second	Period
		Impulse
Response	Step	Oil	stock	Oil	stock
Oil	1	1	0	1	0
	5	0.9879	0.0121	0.9779	0.0221
	10	0.9879	0.0121	0.9779	0.0221
Stock	1	0.0716	0.9284	0.1719	0.8281
	5	0.0813	0.9187	0.2096	0.7904
	10	0.0813	0.9187	0.2102	0.7898
Oil Importing Countries
	Step	Oil	stock	Oil	stock
Oil	1	1	0	1	0
	5	0.9828	0.0172	0.9837	0.0163
	10	0.9828	0.0172	0.9836	0.0164
Stock	1	0.0683	0.9317	0.0853	0.9147
	5	0.0764	0.9236	0.1571	0.8429
	10	0.0764	0.9236	0.1588	0.8412

Source. Authors’ computation.

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